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Current Assets $1000 Accounts Payable $150 Accrued taxes $140 Net Plant $600 Accrued wages $130 Net...

Current Assets $1000 Accounts Payable

$150
Accrued taxes

$140
Net Plant $600 Accrued wages $130
Net Equipment $400 Notes Payable $400
Total Current Liability $820
Firs-mortgage bonds $400
Second-mortgage bonds $300
Subordinated Debentures

$200
Preferred Stock $130
Common Stock $150
Total Assets $2000 Total Claims $2000

The following balance sheet represents Joe’s Electronics’ position at the time it filed for bankruptcy (in thousands of dollars).

Only net plant are pledged as collateral to the mortgage bonds (including both first-mortgage bonds and second-mortgage bonds). Subordinated debentures are subordinated to notes payable only. The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under chapter 7. Sales of the net plant, which were pledged as collateral to the mortgage bondholders, brought in $300,000, the net equipment brought $200,000, while the current assets were sold for another $500,000. Trustee’s costs amounted to $130,000. No single workers were due more than $2,000 in wages, and there were no unfounded pension plan liabilities.

1. How much will the subordinate debenture holders receive from the liquidation?

a. $0

b. $12,700

c. $55,000

d. $100,0009.

2. How much will the notes payable holders receive from the liquidation?

a. $22,857

b. $35,555

c. $90,000

d. $156,522

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PLEASE - - - - PLEASE KINDLY UP-VOTE. IT HELPS ME A LOT. THANK YOU IN ADVANCE.

ekkarill92 answered 1 year ago
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