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Tundra Tots is being liquidated under Chapter 7 of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets are sold for $25,000,000
Tundra Tots is being liquidated under Chapter 7 of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets are sold for $25,000,000 and current assets are sold for $18,000,000. All fixed assets are pledged as collateral for all mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $500,000. No employee is owed over $2,000.
Sale of current assets | 18,000,000 | |||||
Sale of fixed assets | 25,000,000 | |||||
Trustee costs | 500,000 | |||||
Before | Before | |||||
Default | Balance Sheet | Default | ||||
Current Assets | 75,000,000 | Accounts payable | 15,000,000 | |||
Net fixed assets | 50,000,000 | Accrued taxes | 10,000 | |||
Accrued wages | 550,000 | |||||
Notes payable | 3,800,000 | |||||
Total current liabilities | 19,360,000 | |||||
First-mortgage bonds | 18,000,000 | |||||
Second-mortgage bonds | 20,000,000 | |||||
Debentures | 45,000,000 | |||||
Subordinated debentures | 14,000,000 | |||||
Common stock | 2,500,000 | |||||
Retained earnings | 6,140,000 | |||||
Total assets | 125,000,000 | Total claims | 125,000,000 | |||
a. How much will SHs receive? | ||||||
b. How much will mortgage bondholders receive? | ||||||
c. How much will priority creditors receive? | ||||||
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