Question
Problem #1 (from text) Southwestern Wear Inc. has the following balance sheet. The trustees costs total $281,250 and the firm has no accrued taxes or
Problem #1 (from text)
Southwestern Wear Inc. has the following balance sheet. The trustees costs total $281,250 and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.5 million is received from sale of the assets?
Current assets | $1,875,000 | Accounts payable | $375,000 |
Fixed assets | 1,875,000 | Notes payable | 750,000 |
|
| Subordinated debentures | 750,000 |
|
| Total debt | $1,875,000 |
|
| Common equity | 1,875,000 |
Total assets | $3,750,000 | Total liabilities & equity | $3,750,000 |
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