Discuss any of these questions.
They should help you on your final exam.
Explain Lease vs. Buy Why is leasing often preferable to buying
Explain Financial Accounting Standards Board (FASB) Statement #13
Explain some of the terms of operating lease What is the primary test of feasibility in a reorganization
Why would a company call its outstanding bonds? What is the purpose of Chapter 7 of the Bankruptcy Act
What is the effect of heavy use of off-balance sheet lease financing?
What does the basic doctrine of fairness under bankruptcy provisions state?
What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act?
1 is the highest claim, 5 is the lowest.
(1) Trustees' costs to administer and operate the firm.
(2) Common stockholders.
(3) General, or unsecured, creditors.
(4) Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan.
(5) Taxes due to federal and state governments. Which brings in funds faster, private placement or public offering.
What role does bankruptcy play in settling labor disputes and product liability suits?
Discuss any of these questions.
They should help you on your final exam.
Explain Lease vs. Buy Why is leasing often preferable to buying
Explain Financial Accounting Standards Board (FASB) Statement #13
Explain some of the terms of operating lease What is the primary test of feasibility in a reorganization
Why would a company call its outstanding bonds? What is the purpose of Chapter 7 of the Bankruptcy Act
What is the effect of heavy use of off-balance sheet lease financing?
What does the basic doctrine of fairness under bankruptcy provisions state?
What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act?
1 is the highest claim, 5 is the lowest.
(1) Trustees' costs to administer and operate the firm.
(2) Common stockholders.
(3) General, or unsecured, creditors.
(4) Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan.
(5) Taxes due to federal and state governments. Which brings in funds faster, private placement or public offering.
What role does bankruptcy play in settling labor disputes and product liability suits?
Related questions
| 12/8/2012 | ||||||||||
| Chapter: | 24 | |||||||||
| Problem: | 5 | |||||||||
| Duchon Industries had the following balance sheet at the time it defaulted on its interest payments and filed for liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $900 million, while the current assets were sold for another $400 million. Thus, the total proceeds from the liquidation sales were $1,300 million. Trustee's costs amounted to $1 million; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities. Determine the amount available for distribution to all claimants. | ||||||||||
| Balance Sheets (Millions of Dollars) | ||||||||||
| Assets | ||||||||||
| Current assets | $700 | |||||||||
| Net fixed assets | 1,300 | |||||||||
| Total assets | $2,000 | |||||||||
| Liabilities and equity | ||||||||||
| Accounts payable | $80 | |||||||||
| Accrued taxes | 80 | |||||||||
| Accrued wages | 70 | |||||||||
| Notes payable | 400 | |||||||||
| Total current liabilities | $630 | |||||||||
| First-mortgage bondsa | 700 | |||||||||
| Second-mortgage bondsa | 300 | |||||||||
| Debentures | 500 | |||||||||
| Subordinated debenturesb | 200 | |||||||||
| Common stock | 100 | |||||||||
| Retained Earnings | (430) | |||||||||
| Total claims | $2,000 | |||||||||
| a All fixed assets are pledged as collateral to the mortgage bonds. | ||||||||||
| b Subordinated to notes payable only. | ||||||||||
| Other inputs (in thousands of dollars): | ||||||||||
| Proceeds from sale of fixed assets = | $900 | |||||||||
| Proceeds from sale of current assets = | $401 | |||||||||
| Trustee's costs = | $1 | |||||||||
| Total claims (including trustee expenses) | $2,331 | |||||||||
| Total cash from liquidation | $1,301 | |||||||||
| Amount available for distribution to shareholders | $0 | |||||||||
| Initital Distribution to Priority Claimants | ||||||||||
| Priority claims: | ||||||||||
| Trustee's expenses | $1 | |||||||||
| Worker's wages due | $70 | |||||||||
| Government taxes due | $80 | |||||||||
| Distribution to first mortgage (paid from sale of fixed assets) | $700 | |||||||||
| Remaining proceeds from sale of fixed assets after satisfying first mortgage holders | ||||||||||
| $200 | ||||||||||
| Distribution to second mortgage (paid from sale of fixed assets after satisfying first mortgage holders) | ||||||||||
| $200 | ||||||||||
| Remaining proceeds from sale of fixed assets after satisfying first and second mortgage holders | ||||||||||
| $0 | ||||||||||
| Total preliminary distributions to priority claimaints | $1,051 | |||||||||
| Total of satisfied priority claims | $1,051 | |||||||||
| Total unsastified claims from all claimants | $1,280 | |||||||||
| Funds available for distribution to general creditors: | $250 | |||||||||
| Pro rata distribution percentage | 19.5% | |||||||||
| Distributions due to general claims: | Distribution after Subordination Adjustment | |||||||||
| Remaining Unsatisfied Claim | ||||||||||
| Amount of Claim | Pro Rata Distribution | Subordination Adjustment | ||||||||
| Unsatisfied first mortgage | $0 | $0.00 | $0.00 | |||||||
| Unsatisfied second mortgage | $100 | $19.53 | $80.47 | |||||||
| Accounts payable | $80 | $15.63 | $64.38 | |||||||
| Notes payable | $400 | $78.13 | $321.88 | $39.06 | $117.19 | |||||
| Debentures | $500 | $97.66 | $402.34 | |||||||
| Subordinated debentures | $200 | $39.06 | $109.94 | $39.06 | $0.00 | |||||
| Total | $1,280 | $250 | $1,030 | |||||||
| Total distributions (including prior distributions to mortgage holders and subordination adjustment): | ||||||||||
| Percent of Claim Satisfied | ||||||||||
| Total Distribution | Original Claim | |||||||||
| First mortgage | $700.00 | $700 | 100% | |||||||
| Second mortgage | $200.00 | $300 | 67% | |||||||
| Accounts payable | $15.63 | $80 | 20% | |||||||
| Notes payable | $117.19 | $400 | 29% | |||||||
| Debentures | $97.66 | $500 | 20% | |||||||
| Subordinated debentures | $0.00 | $200 | 0% | |||||||
| PLEASE EMAIL ME THE EXCEL STEPS ON HOW YOU GOT THE ANSWERS. MY EMAIL IS ([email protected]) | ||||||||||
