At the time it defaulted on its interest payments and filed for bankruptcy, McDa
ID: 2648531 • Letter: A
Question
At the time it defaulted on its interest payments and filed for bankruptcy, McDaniel Mining Company had the following balance sheet shown below (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $310,000. Thus, the total proceeds from the liquidation sale were $710,000. The trustee's costs amounted to $65,000; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities.
How much will the remaining general creditors receive from the distribution before subordination adjustment? Round your answers to the nearest dollar. Enter your answer in dollars.
At the time it defaulted on its interest payments and filed for bankruptcy, McDaniel Mining Company had the following balance sheet shown below (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $310,000. Thus, the total proceeds from the liquidation sale were $710,000. The trustee's costs amounted to $65,000; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities.
Current assets $ 400 Account payable $ 50 Net fixed assets 600 Accrued taxes 40 Accrued wages 30 Notes payable 180 Total current liabilities $ 300 First-mortgage bonds* 300 Second-mortgage bonds* 200 Debentures 200 Subordinated debentures** 100 Common stock 50 Retained earnings -150 Total assets $1,000 Total claims $1,000 Notes:*All fixed assets are pledged as collateral to the mortgage bonds.
**Subordinated to notes payable only
How much will the remaining general creditors receive from the distribution before subordination adjustment? Round your answers to the nearest dollar. Enter your answer in dollars.
Explanation / Answer
Receipt Amount Payment Amount Fixed Assets 400000 Trustee cost 65000 Less: First Mortgage bonds 300000 Accrued Taxes 40000 100000 Accrued Wages 30000 Less: Second mortgarg bonds 100000 0 Current Assets 310000 Balanceafter Prefential Payment 175000 310000 310000 Apportionment of Expense before Sub - ordination adjustment Due Amount Amount received Amount Received (ROUNDED OFF) Account Payable 50000 16509.43 16509 Notes Payable 180000 59433.96 59434 Debentures 200000 66037.74 66038 Subordinated Debentures 100000 33018.87 33019 530000
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