Problem 24-01 (THIS IS ALL THE INFORMATION PROVIDED)

Liquidation

Southwestern Wear Inc. has the following balance sheet:

Current Assets	$ 1,875,000.00	Accounts Payable	$ 375,000.00
Fixed Assets	$ 1,875,000.00	Notes Payable	$ 750,000.00
		Subordinated Debentures	$ 750,000.00
		total debt	$ 1,875,000.00
		Common Equity	$ 1,875,000.00
Total Assets	$ 3,750,000.00	Total Liabilities and Equity	$ 3,750,000.00

The trustee's costs total $322,000, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. 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 $3.5 million is received from sale of the assets?

Distribution of proceeds on liquidation:

1.) Proceeds from sale of assets $ _____(?)_____

2.) First mortgage, paid from sale of assets $ ____(?)_____

3.) Fees and expenses of administration of bankruptcy $ _____(?)______

4.) Wages due workers earned within 3 months prior to filing of bankruptcy petition $ ______(?)______

5.) Taxes $ _____(?)_______

6.) Unfunded pension liabilities $ _____(?)______

7.) Available to general creditors $ ____(?)_______

Distribution to general creditors:

8.)

Claims of General Creditors	1.) Claim	2.) Application of 100% Distribution	3.) After Subordination Adjustment	4.) Percentage of Original Claims Received
Notes Payable	?______ $	?______ $	?______ $	?______ %
Accounts Payable	?______ $	?______ $	?______ $	?______ %
Subordinated Debentures	?______ $	?______ $	?______ $	?______ %
Total	?______ $	?______ $	?______ $

9.) The remaining $___?___ will go to the common stockholders.