Question 5.(20 points) Pontrain Imports will be liquidated.Its current balance sheet is shown below.Current assets are sold for $2,100,000 and fixed assets are sold for $5,000,000.All fixed assets are pledged as collateral for all mortgage bonds.Subordinated debentures are subordinate only to notes payable.Trustee costs are $500,000.

Sale of current assets 2,100,000

Sale of fixed assets 5,000,000

Trustee costs 500,000

Before

Before

Default

Balance Sheet Default Current Assets 3,000,000

Accounts payable 465,000 Net fixed assets 7,600,000

Accrued taxes 80,000

Accrued wages 95,000

Notes payable 60,000

Total current liabilities 700,000

First-mortgage bonds 2,000,000

Second-mortgage bonds 3,500,000

Subordinated debentures 4,500,000

Common stock 200,000

Retained earnings (300,000) Total assets 10,600,000

Total claims 10,600,000

a. How much will SHs receive?

b. How much will mortgage bondholders receive?

c. How much will priority creditors receive?

d.Identify the remaining general creditors.How much will each receive before subordination adjustment and after adjustment?