Mondesto Company has the following debts: Unsecured creditors $ 233,000 Liabilit

Question

Mondesto Company has the following debts:

Unsecured creditors $ 233,000
Liabilities with priority 113,000
Secured liabilities:
Debt 1, $216,000; value of pledged asset 183,000
Debt 2, $177,000; value of pledged asset 103,000
Debt 3, $123,000; value of pledged asset 146,000

The company also has a number of other assets that are not pledged in any way. The creditors holding Debt 2 want to receive at least $151,100.

For how much do these free assets have to be sold so that the creditors associated with Debt 2 receive exactly $151,100?

Explanation / Answer

Free assets of $334,00 be sold so that the creditors associated with Debt 2 receive exactly $151,100.

Explanation: Unsecured creditors =$233,000 Unsecured creditors from Debt 1(216000-183000)=$33,000 Unsecured creditors from Debt 2(177,000-103000)=$74,000 Total unsecured creditors=$340,000 % of money Debt 2 want to receive=$48,100/$74,000 =65% ($48100=$151100-$103000) Money should receive for unsecured creditors and liability with priorities from sale of free assets: Money needed for liabilities with priorities=$113,000 Money needed for unsecured creditors(340,000*65%) =221000 Total money needed from sale of freed assets (113000+221000)=$334,000

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