Nikul Elixir Corporation has just filed for bankruptcy. Elixir is a holding company whose assets consist of real estate worth $90 million and100% of the equity of its two operating subsidiaries. It is financed partly by equity and partly by an issue of $410 million of seniorcollateral trust bonds that are just about to mature. Subsidiary A has issued directly $330 million of debentures and $16 million ofpreferred stock. Subsidiary B has issued $185 million of senior debentures and $65 million of subordinated debentures. A's assetshave a market value of $505 million, and B's have a value of $226 million. How much will each security holder receive if the assets aresold and distributed strictly according to precedence?Note: Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions.DebentureSenior debentureSubordinated debentureTrust bondPreferred stockPayoffmillionmillionmillionmillionmillion

An individual or an entity may file for bankruptcy if they are unable to pay their debts and other…

Answered: and $65 million of subordinated…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Baguio Company is experiencing financial difficulty and is renegotiating debt restructuring with the creditor to relieve its financiaal stress. The entity has P5,000,000 note payable to First Bank. The bank is considering two alternatives. Acceptance of land owned by the entity valued at P4,000,000 and carried at its historical cost of P2,800,000 Acceptance of an equity interest in the entity in the form of 40,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Required: Prepare journal entry that Baguio Company would make under each alternative.
In your answers to the following set of questions,assume that Ross Corporation has $200 millionof assets at book value, $150 million of liabilitiesowed to 500 different creditors, and $50 million ofcommon equity book value. Also, assume that Rosshas failed to make timely payments on its debt. The assets are worth less than the $200 millionshown on the balance sheet, although their actualmarket value is uncertain. The company issuedmortgage bonds that are held by public bondholders and are secured by real estate, and 15 differentbanks hold loans secured by all of the company’saccounts receivable, inventories, and equipment.There are also some 250 general (unsecured) creditors, including accounts payable, accrued wagesand taxes, and pension plan obligations. Answerthe following questions:a. Should Ross attempt to resolve its problemsusing informal procedures, or should it file forbankruptcy? Why?
Master Ltd, whose capital consisted of $500,000 in fully paid shares, was wound up as a result of a court order. Its liquidator realised $891,950 from the sale of the company’s assets. This amount included $250,000 from the proceeds on sale of the company’s land and buildings. Debts proved and admitted were: Unsecured notes $150,000 Debentures (secured by circulating security interest) 350,000 First mortgage on land and buildings 200,000 Trade accounts payable 78,000 PAYG tax instalment 860 Fringe benefits tax 3,000 GST 3,989 Employees’ holiday pay 3,000 Employees’ wages — 5 employees for 2 weeks at $400 per week 4,000 Secretary’s salary — 3 weeks at $550 per week 1650 Managing director’s salary — 4 weeks at $900 per week 3,600 Sales commission 4,000 Liquidation expenses 80,000 Second mortgage on land and buildings 90,000 Liquidator’s remuneration 6,000 Instructions: Show the order of priority of payment of debts for Master Ltd and calculate the amount payable to the company’s…
Raymund Lipstix Co. owns 80% of PH Care, Inc. During the year, PH Care, Inc. filed for bankruptcy and is about to enter into liquidation. Raymund Lipstix Co. has an outstanding unsecured receivable of P4,000,000 from PH Care, Inc. together with an investment in subsidiary of P20,000,000. The statement of affairs of PH Care, Inc. shows a 100% recovery for outside creditors and a 20% recovery for inside creditors. 30. How much can Raymund Lipstix Co. expect to recover from its receivable? a. 800,000 b. 4,800,000 c. 640,000 d.0
Jordon, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $400,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated? A. 0 B. $100,000 C. $300,000 D. $400,000
1. TXT Company is currently under financial difficulty and is unable to meet interest payments and fund requirements to retire its P 10,000,000 bonds payable held by BTS Corporation. Accrued interest on the bonds amounted to 10% of the face value of the bonds. To prevent bankruptcy, TXT Company agreed with BTS Corporation to exchange equity securities for the bonds. TXT Company is issuing 100,000 shares of its P 50 par value ordinary shares. The ordinary share is currently selling at P 80. How much is the gain on debt restructuring? 2. KIEL Department store grants loyalty awards to its customers wherein for every P 100 purchase made, the customer receives 5 points equivalent to P 5. The points accumulated by the customer may be used as part or full payment for merchandise purchases in the future. During 2018, total sales amounted to P 10,000,000. The fair values of the merchandise sold and reward points are P 9,500,000 and P 500,000, respectively. At the end of 2018, 60% out of 90%…
Quest Company is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire P6,000,000 note payable with accrued interest payable of P600,000. The entity has entered into an agreement with the creditor to exchange equity instruments for the liability.The terms of the exchange are 300,000 ordinary shares wit P5 par value and P10 market value, and 25,000 preference shares with P10 par value and P60 market value. 1. What is the gain on the extinguishment of the note payable? 2. What is the total share premium from the issuance of the preference and ordinary shares?
The Southeast Asia Corporation (SAC) is to be liquidated. The market value of its assets is $24 million. Bonds with a face value of $14.6 million are unsecured. SAC has no subordinated debentures outstanding; shareholders' equity has a market value of $4 million; $930,000 is used to cover administrative costs and other claims (including unpaid wages, pension benefits, legal fees, and taxes). The company has a liquidating value of $20 million. Of this amount, $12 million represents the proceeds from the sale of their flagship Indonesian resort. As a trustee in bankruptcy, you wish to follow the bankruptcy law strictly. What is your proposed distribution? (Enter your answers in whole dollars not in millions. Do not round intermediate calculations. Omit $ sign in your response.) Administrative fees and other claims Bond holders Equity holders Proposed distribution $ $ $
Whaleco acquired all of the common stock of MinnowCo early in year 1 for $900,000, and MinnowCo immediately elected to join WhaleCo's consolidated Federal income tax return. As part of the takeover, WhaleCo also acquired $300,000 of MinnowCo bonds. The results of MinnowCo for the first few years of the group operations were reported as follows: Determine WhaleCo's basis in its MinnowCo common stock and the excess loss account as of the end of each tax year. If an amount is zero, enter "0". Tax Year 1 2 Operating Gain or Loss $100,000 (800,000) (600,000) Stock Basis 1,000,000 2,000,000 X 0 Excess Loss 1,000,000 X 200,000 X 0 X
Shanghai Company is unable to meet interest payments and fund requirements to retire its P1,500,000 bonds payable. Accrued interest on the bonds amounted to P150,000. The bonds are held by Spaghetti Investments, Inc. To prevent bankruptcy, Shanghai Company entered into an agreement with Spaghetti Financing, Inc. to exchange equity securities for the debt. Shanghai Company is issuing 20,000 shares of its P50 par value ordinary shares. The ordinary share is currently selling at P65. The gain on debt restructuring is A. 250,000 B. 350,000 C. 650,000 D. 0
Plano Ltd, whose capital consisted of $50000 in fully paid shares, was wound up as a result of a court order. Its liquidator realised $1,343,300 from the sale of the company’s assets. This amount included $340,000 from the proceeds on sale of the company’s land and buildings. Debts proved and admitted were: Unsecured Notes 200000 Debentures (secured by circulating security interest) 600000 First mortgage on land and buildings 200000 Trade accounts payable 160000 PAYG tax instalment 1560 Fringe benefits tax 4000 Directors’ fees 6000 GST 3978 Employees’ holiday pay 10000 Employees’ wages — 8000 Secretary’s salary — 1440 Managing director’s salary — 4800 Sales commission 1000 Liquidation expenses 6000 Second mortgage on land and buildings 160000 Liquidator’s remuneration 16000 Required Show the order of priority of payment of debts for Plano Ltd and calculate the amount payable to the…
Plano Ltd, whose capital consisted of $50000 in fully paid shares, was wound up as a result of a court order. Its liquidator realised $1,343,300 from the sale of the company’s assets. This amount included $340,000 from the proceeds on sale of the company’s land and buildings. Debts proved and admitted were: Unsecured Notes 200000 Debentures (secured by circulating security interest) 600000 First mortgage on land and buildings 200000 Trade accounts payable 160000 PAYG tax instalment 1560 Fringe benefits tax 4000 Directors’ fees 6000 GST 3978 Employees’ holiday pay 10000 Employees’ wages — 8000 Secretary’s salary — 1440 Managing director’s salary — 4800 Sales commission 1000 Liquidation expenses 6000 Second mortgage on land and buildings 160000 Liquidator’s remuneration 16000 Required Show the order of priority of payment of debts for Plano Ltd and calculate the amount payable to…

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