In: Accounting
SUBJECT: Bankruptcy
"At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (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 $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee’s costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Determine the distribution of proceeds to the claimants."
Current Assets | $400 | Accounts Payable | $50 | |||
Net Fixed Assets | $600 | Accrued Taxes | $40 | |||
Accured Wages | $30 | |||||
Notes Payable | $180 | |||||
Total CL | $300 | |||||
1st Mortgage Bonds | $300 | |||||
2nd Mortgage Bonds | $200 | |||||
Debentures | $200 | |||||
Subordinated Debentures | $100 | |||||
Common Stock | $50 | |||||
Retained Earnings | ($150) | |||||
Total Assets | $1,000 | Total Claims | $1,000 |
Could you please answer in table format to show how the calculations were made.
Receipts Amount Payment Amount
Sale of fixed asset 400000 Trustees cost 50000
Less:Mortgage loan (300000) preferential creditors 70000
------------ creditors 230000
100000 Secured debt 200000
Current assets 200000 unsecured debt 200000
Common stock 7270000 subordinated debt 100000
------------ --------------
75700000 7570000
------------- ------------
TOTAL proceeds available = 300000
TOTAL liability = 7420000+ Retained earnings 150000 = 7570000
Balance liability = 7570000-300000 = 7270000
Share value = 7270000/50000 = 145.4 as receivable