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 $$410,000,$ while the current assets were sold for another $$230,000.$ Thus, the total proceeds from the liquidation sale were $$640,000.$ The trustee's costs amounted to $$30,000$; 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 bondsa $300$

Second$-$mortgage bondsa $200$

Debentures $200$

Subordinated debenturesb $100$

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 McDaniel's shareholders receive from the liquidation? Write out your answer completely. For example, $5$ thousand dollar should be entered as $5,000.$ Round your answer to the nearest dollar. If no entry is required, enter $"0".$

$

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$-$

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$-$

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.

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