Vandalay Industries has the following balance sheet: The debentures are subordin
ID: 2744571 • Letter: V
Question
Vandalay Industries has the following balance sheet: The debentures are subordinated to only the notes payable. Suppose the company goes bankrupt and is liquidated, receiving 50 cents on the dollar for inventory, $1,000 being received from A/R and cash at face value. Fixed assets are liquidated for $3,300. The fixed assets served as collateral for the 1st and 2nd mortgage bonds. Trustee’s costs total $500 How much will each class of investor receive and what percentage of their original claim will they recover?
Vandalay Industries has the following balance sheet:
Assets
Liabilities and Equity
Cash
$ 60
A/P
$1,580
A/R
1,200
N/P (Bank)
1040
Inventory
1,800
Accrued Taxes
250
Total Current
3,060
Accrued Wages
580
Total Current
3,450
Equipment
2,500
Buildings
2,200
1st Mortgage Bonds
2,500
Land
2,480
2nd Mortgage Bonds
1,000
Total Fixed
7,180
Subordinated Debentures
1,730
Total Liabilities
8,680
Preferred Stock
360
Common Stock
1,200
Total Assets
$10,240
Total Liabilities & Equity
$10,240
Assets
Liabilities and Equity
Cash
$ 60
A/P
$1,580
A/R
1,200
N/P (Bank)
1040
Inventory
1,800
Accrued Taxes
250
Total Current
3,060
Accrued Wages
580
Total Current
3,450
Equipment
2,500
Buildings
2,200
1st Mortgage Bonds
2,500
Land
2,480
2nd Mortgage Bonds
1,000
Total Fixed
7,180
Subordinated Debentures
1,730
Total Liabilities
8,680
Preferred Stock
360
Common Stock
1,200
Total Assets
$10,240
Total Liabilities & Equity
$10,240
Explanation / Answer
Cash = $60
Inventory=$900(recover 50 cent out of $!)
A/R =$1200
Fixed assets=$3300
$ 5460
1st+2nd mortage= 3500(secured by fixed assets)
Accrued wages $580(having priorty rights)
Accured Tax = $250(having priorty rights)
N/P Bank =$1040
$ 90 (divide in investors)
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