Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 24, Problem 5SP
Summary Introduction
Determine: Amount that is available for distribution to shareholders and all claimants.
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Deere, Inc. will be liquidated under Chapter 7 of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets will be sold for $4,000,000 and current assets will be sold for $3,000,000. All fixed assets are pledged as collateral for all mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $750,000.
Before
Before
Default
Balance Sheet
Default
Current Assets
5,000,000
Accounts payable
1,000,000
Net fixed assets
7,000,000
Accrued taxes
50,000
Accrued wages
85,000
Notes payable
2,000,000
Total current liabilities
3,135,000
First-mortgage bonds
2,000,000
Second-mortgage bonds
3,000,000
Subordinated debentures
5,000,000
Common stock
300,000
Retained earnings
(1,435,000)
Total assets
12,000,000
Total claims
12,000,000
a. How much will SHs receive?
b. How much will mortgage bondholders receive?
c. How much will…
When the Beacon Computer Company filed for bankruptcy under CCAA, it had the following balance sheet information:
Liquidating Value
Claims
Trade credit
$ 6,700
Secured mortgage notes
9,900
Senior debentures
11,900
Junior debentures
Total assets
$30,400 Equity
16,900
-15,000
Assuming there are no legal fees associated with the bankruptcy, as a trustee, what distribution of liquidating value do you propose?
(Do not leave any empty spaces; input a O wherever it is required. Enter the answers in dollars. Omit $ sign in your response.)
Trade credit
Secured mortgage notes
Senior debentures
Junior debentures
Equity
Distribution of
liquidating value
When the Beacon Computer Company filed for bankruptcy under CCAA, it had the following balance sheet information:
Liquidating Value
claims
Trade credit
$ 6,400
Secured mortgage notes
9,600
Senior debentures
11,600
Junior debentures
Total assets
$30,100 Equity
16,600
-14,100
Assuming there are no legal fees associated with the bankruptcy, as a trustee, what distribution of liquidating value do you propose?
(Do not leave any empty spaces; input a O wherever it is required. Omit "$" sign in your response.)
Distribution of
liquidating value
Trade credit
Secured mortgage notes
Senior debentures
Junior debentures
Equity
$
Chapter 24 Solutions
Financial Management: Theory & Practice
Ch. 24 - Prob. 1QCh. 24 - Why do creditors usually accept a plan for...Ch. 24 - Would it be a sound rule to liquidate whenever the...Ch. 24 - Why do liquidations usually result in losses for...Ch. 24 - Prob. 5QCh. 24 - Southwestern Wear Inc. has the following balance...Ch. 24 - At the time it defaulted on its interest payments...Ch. 24 - Prob. 4PCh. 24 - Prob. 5SPCh. 24 - Prob. 1MC
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- When the Beacon Computer Company filed for bankruptcy under CCAA, it had the following balance sheet information: Liquidating Value Total assets $30,400 Equity Claims Trade credit Secured mortgage notes Senior debentures Junior debentures Trade credit Secured mortgage notes Senior debentures Junior debentures Equity $ 6,700 9,900 11,900 16,900 -15,000 Assuming there are no legal fees associated with the bankruptcy, as a trustee, what distribution of liquidating value do you propose? (Do not leave any empty spaces; input a 0 wherever it is required. Enter the answers in dollars. Omit $ sign in your response.) Distribution of liquidating value $arrow_forwardProvide clear explanation: 1. The following transactions were ascertained during bankruptcy of BBB Co.: A mortgage payable of P192,500 is secured by building valued at P15,000 less than its carrying amount of P230,000. Note payable of P97,500 is secured by furniture and equipment with a carrying amount of P120,000 that is estimated to be 70% unrealizable. Assets not mentioned above have an estimated value of P62,500, an amount that is P15,000 below its carrying amount. Total liabilities not mentioned above total P96,000, including claims with priority of P18,500, interest on mortgage of 2,500 and interest on the note of 800. What is the estimated recovery percentage of the partially secured creditors? а. 66.34% b. 69.53% c. 68.23% d. 67.21% What is the estimated loss on realization of assets? а. 66,000 b. 114,000 С. 30,000 d. 99,000 What is the estimated payment to creditors without priority? 64,005 b. 34,792 с. 35,874 d. 65,125 а.arrow_forwardThe Sunshine Company has the following data in connection with its bankruptcy petition with the Securities and Exchange Commission at the end of 2018. Unsecured creditorsP287.500. Liabilities with priority137,500 Secured Liabilities Debt 1, P262,500; value of pledged asset 225,000 Debt 2, P212,500, value of pledged asset 125,000 Debt 3, P150,000, value of pledged asset 175,000' The company also has a number of other assets that are not pledge in any way, The creditors holding Debt 2 want to receive at least P177,50 Required: For how much do these free assets have to be sold so that Debt 2 would receive exactly P177,500. Show your solutionarrow_forward
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