The following balance sheet represents Boles Electronics Corporation's position at the time it filed for bankruptcy (in thousands of dollars):
Cash $10 Accounts payable $1,600 Receivables 100 Notes payable 500 Inventories 890 Wages payable 150 Taxes payable 50 Total current assets $1,000 Total current liabilities $2,300 Net plant 4,000 Mortgage bods 2,000 Net equipment 5,000 Subordinated debentures 2,500 Preferred stock 1,500 Common stock 1,700 Total assets $10,000 Total claims $10,000
The mortgage bonds are secured by the plant but not by the equipment. The subordinated debentrues are subordinated to notes payable. The firm was unable to reorganize under Chapter 11; therefore, it was liquidated under Chapter 7. The trustee, whose legal and administrative fees amounted to $200,000, sold off the assets and received the following proceeds (in thousands of dollars):
Asset Proceeds Plant $1,600 Equipment 1,300 Receivables 50 Inventories 240 Total $3,190
In addition, the firm had $10,000 in cash abailable for distribution. No single wage earner had more than $10,000 in claims, and there were no unfunded pension plan liabilities.
QUESTION 2:
Determine the dollar distribution to each creditor and to the trustee. What percentage of each claim is satisfied?
The following balance sheet represents Boles Electronics Corporation's position at the time it filed for bankruptcy (in thousands of dollars):
| Cash | $10 | Accounts payable | $1,600 |
| Receivables | 100 | Notes payable | 500 |
| Inventories | 890 | Wages payable | 150 |
| Taxes payable | 50 | ||
| Total current assets | $1,000 | Total current liabilities | $2,300 |
| Net plant | 4,000 | Mortgage bods | 2,000 |
| Net equipment | 5,000 | Subordinated debentures | 2,500 |
| Preferred stock | 1,500 | ||
| Common stock | 1,700 | ||
| Total assets | $10,000 | Total claims | $10,000 |
The mortgage bonds are secured by the plant but not by the equipment. The subordinated debentrues are subordinated to notes payable. The firm was unable to reorganize under Chapter 11; therefore, it was liquidated under Chapter 7. The trustee, whose legal and administrative fees amounted to $200,000, sold off the assets and received the following proceeds (in thousands of dollars):
| Asset | Proceeds |
| Plant | $1,600 |
| Equipment | 1,300 |
| Receivables | 50 |
| Inventories | 240 |
| Total | $3,190 |
In addition, the firm had $10,000 in cash abailable for distribution. No single wage earner had more than $10,000 in claims, and there were no unfunded pension plan liabilities.
QUESTION 2:
Determine the dollar distribution to each creditor and to the trustee. What percentage of each claim is satisfied?
Related questions
The following balance sheet represents Boles Electronics Corporation's position at the time it filed for bankruptcy (in thousands of dollars):
| Cash | $10 | Accounts payable | $1,600 |
| Receivables | 100 | Notes payable | 500 |
| Inventories | 890 | Wages payable | 150 |
| Taxes payable | 50 | ||
| Total current assets | $1,000 | Total current liabilities | $2,300 |
| Net plant | 4,000 | Mortgage bods | 2,000 |
| Net equipment | 5,000 | Subordinated debentures | 2,500 |
| Preferred stock | 1,500 | ||
| Common stock | 1,700 | ||
| Total assets | $10,000 | Total claims | $10,000 |
The mortgage bonds are secured by the plant but not by the equipment. The subordinated debentrues are subordinated to notes payable. The firm was unable to reorganize under Chapter 11; therefore, it was liquidated under Chapter 7. The trustee, whose legal and administrative fees amounted to $200,000, sold off the assets and received the following proceeds (in thousands of dollars):
| Asset | Proceeds |
| Plant | $1,600 |
| Equipment | 1,300 |
| Receivables | 50 |
| Inventories | 240 |
| Total | $3,190 |
In addition, the firm had $10,000 in cash abailable for distribution. No single wage earner had more than $10,000 in claims, and there were no unfunded pension plan liabilities.
QUESTION:
What is the total amount available for distribution to all claimants? What is the total of creditor and trustee claims? Will the preferred and common stockholders receive any distributions?
| 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]) | ||||||||||
