Liquidation At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown below (in thousands of dollars) The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7 Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $430,000, while the current assets were sold for another $240,000 Thus, the total proceeds from the liquidation sale were $670,000 The trustee's costs amounted to $50,000 no single worker was due more than the maximum allowable wages per worker and there were no unfunded pension plan liabilities Balance Sheet (Thousands of Dollars) Current assets $ 400 Account payable $ 50 Net fixed assets 600 Accrued taxes 40 Accrued wages 30 Notes payable 180 Total current liabilities $ 300 First mortgage bonds a 300 Second mortgage bonds a 200 Debentures 200 Subordinated debentures b 100 Common stock 50 Retained earnings (150) Total assets $ 1,000 Total liabilities equity $ 1,000 Notes a All fixed assets are pledged as collateral to the mortgage bonds b Subordinated to notes payable only How much will the first mortgage bondholders receive from collateralized assets Will they receive their full claim If not, how much is their remaining claim Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answers to the nearest dollar If no entry is required, enter 0 The first mortgage bondholders will receive $ from collateralized assets that Select isis notItem 3 equal to their full claim Therefore, the first mortgage holders have $ in unsatisfied claims How much will the second mortgage bondholders receive from collateralized assets Will they receive their full claim If not, how much is their remaining claim Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answers to the nearest dollar If no entry is required, enter 0 The second mortgage bondholders will receive $ from collateralized assets that Select isis notItem 6 equal to their full claim Therefore, the second mortgage holders have $ in unsatisfied claims How much will the other priority claimants (in addition to the mortgage bondholders) receive from the liquidation Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answers to the nearest dollar Remainging primary claimants Amount Trustee's expenses $ Workers' wages due $ Governments' taxes due $ Total $ How much will the remaining general creditors receive from the distribution before subordination adjustment Do not round intermediate calculations Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answers to the nearest dollar Account Amount Received before subordination adjustment Accounts payable $ Notes payable $ Second mortgage bonds $ Debentures $ Subordinated debentures $ Total $ How much will the remaining general creditors receive after subordination Do not round intermediate calculations Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answers to the nearest dollar If no entry is required, enter 0 Account Amount Received after subordination adjustment Accounts payable $ Notes payable $ Second mortgage bonds $ Debentures $ Subordinated debentures $ Total $ How much in total will the second mortgage holders receive (include the amount received from collateral) Do not round intermediate calculations Write out your answer completely For example, 5 thousand dollar should be entered as 5,000 Round your answer to the nearest dollar $

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 16, 2024

Liquidation At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown below (in

Liquidation

At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown below (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $430,000, while the current assets were sold for another $240,000. Thus, the total proceeds from the liquidation sale were $670,000. The trustee's costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities.

Balance Sheet (Thousands of Dollars)
Current assets	$	400	Account payable	$	50
Net fixed assets		600	Accrued taxes		40
			Accrued wages		30
			Notes payable		180
			Total current liabilities	$	300
			First-mortgage bonds^a		300
			Second-mortgage bonds^a		200
			Debentures		200
			Subordinated debentures^b		100
			Common stock		50
			Retained earnings		(150)
Total assets	$	1,000	Total liabilities & equity	$	1,000
Notes: ^aAll fixed assets are pledged as collateral to the mortgage bonds. ^bSubordinated to notes payable only.

How much will the first mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answers to the nearest dollar. If no entry is required, enter "0".
The first mortgage bondholders will receive $ from collateralized assets that -Select-isis notItem 3 equal to their full claim. Therefore, the first mortgage holders have $ in unsatisfied claims.
How much will the second mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answers to the nearest dollar. If no entry is required, enter "0".
The second mortgage bondholders will receive $ from collateralized assets that -Select-isis notItem 6 equal to their full claim. Therefore, the second mortgage holders have $ in unsatisfied claims.
How much will the other priority claimants (in addition to the mortgage bondholders) receive from the liquidation? Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answers to the nearest dollar.

Remainging primary claimants Amount

Trustee's expenses $

Workers' wages due $

Governments' taxes due $

Total $

How much will the remaining general creditors receive from the distribution before subordination adjustment? Do not round intermediate calculations. Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answers to the nearest dollar.

Account	Amount Received before subordination adjustment
Accounts payable		$
Notes payable		$
Second mortgage bonds		$
Debentures		$
Subordinated debentures		$
Total		$

How much will the remaining general creditors receive after subordination? Do not round intermediate calculations. Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answers to the nearest dollar. If no entry is required, enter "0".

Account	Amount Received after subordination adjustment
Accounts payable		$
Notes payable		$
Second mortgage bonds		$
Debentures		$
Subordinated debentures		$
Total		$

How much in total will the second mortgage holders receive (include the amount received from collateral)? Do not round intermediate calculations. Write out your answer completely. For example, 5 thousand dollar should be entered as 5,000. Round your answer to the nearest dollar.