Southwestern Wear Inc. has the following balance sheet: Current assets Fixed assets $1,875,000 Accounts payable 1,875,000 Notes payable Subordinated debentures Total assets Total debt Common equity $3,750,000 Total liabilities & equity $ 375,000 750,000 750,000 $1,875,000 1,875,000 $3,750,000 The trustee's costs total $286,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter "0". Enter your answers as positive values. Distribution of proceeds on liquidation: Proceeds from the sale of assets Less: 1. First mortgage (paid from the sale of fixed assets) 2. Fees and expenses of bankruptcy 3. Wages due to workers within 3 months of bankruptcy 4. Taxes due to federal, state, and local governments 5. Unfunded pension liabilities Funds available for distribution to general creditors Distribution to general creditors: $ 4,000,000 General Creditors' Claims (1) Accounts payable Notes payable Subordinated debentures Total Distribution after Application of 100% Subordination Percentage of Original Claim Amount of Claim (2) Distribution (3) Adjustment (4) Received (5) % $ $ Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places. The remaining $ will go to the common stockholders. They will receive only % of the amount of equity on the balance sheet.

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
Question
Southwestern Wear Inc. has the following balance sheet:
Current assets
Fixed assets
$1,875,000 Accounts payable
1,875,000 Notes payable
Subordinated debentures
Total assets
Total debt
Common equity
$3,750,000 Total liabilities & equity
$ 375,000
750,000
750,000
$1,875,000
1,875,000
$3,750,000
The trustee's costs total $286,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes
payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for
monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter "0". Enter your answers as positive values.
Distribution of proceeds on liquidation:
Proceeds from the sale of assets
Less:
1. First mortgage (paid from the sale of fixed assets)
2. Fees and expenses of bankruptcy
3. Wages due to workers within 3 months of bankruptcy
4. Taxes due to federal, state, and local governments
5. Unfunded pension liabilities
Funds available for distribution to general creditors
Distribution to general creditors:
$
4,000,000
General Creditors'
Claims
(1)
Accounts payable
Notes payable
Subordinated
debentures
Total
Distribution after
Application of 100%
Subordination
Percentage of
Original Claim
Amount of Claim
(2)
Distribution
(3)
Adjustment
(4)
Received
(5)
%
$
$
Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.
The remaining $
will go to the common stockholders. They will receive only
% of the amount of equity on the balance sheet.
Transcribed Image Text:Southwestern Wear Inc. has the following balance sheet: Current assets Fixed assets $1,875,000 Accounts payable 1,875,000 Notes payable Subordinated debentures Total assets Total debt Common equity $3,750,000 Total liabilities & equity $ 375,000 750,000 750,000 $1,875,000 1,875,000 $3,750,000 The trustee's costs total $286,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter "0". Enter your answers as positive values. Distribution of proceeds on liquidation: Proceeds from the sale of assets Less: 1. First mortgage (paid from the sale of fixed assets) 2. Fees and expenses of bankruptcy 3. Wages due to workers within 3 months of bankruptcy 4. Taxes due to federal, state, and local governments 5. Unfunded pension liabilities Funds available for distribution to general creditors Distribution to general creditors: $ 4,000,000 General Creditors' Claims (1) Accounts payable Notes payable Subordinated debentures Total Distribution after Application of 100% Subordination Percentage of Original Claim Amount of Claim (2) Distribution (3) Adjustment (4) Received (5) % $ $ Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places. The remaining $ will go to the common stockholders. They will receive only % of the amount of equity on the balance sheet.
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