Chapter 25, Problem 8MC

1.What is the impact of subordination on the final allocation of proceeds from liquidation?  2.in general jow much do unsecured creditors receive from a liquidation?

In a liquidation proceeding, if the proceeds on the realization of an asset exceed the lien against that asset, the excess is assigned to*a. the holder of the lien.b. meet the claims of the unsecured creditors.c. the stockholders of the corporation.d. other lien holders whose assets will not realize a sufficient amount to cover their liens.

Matmart Corporation is contemplating seeking a voluntary liquidation of the Bankruptcy Reform Act. There are a large number of partially secured creditors who are opposed to the possibility of a liquidation and favor a restructuring of their debt, which will allow the corporation to return to profitability and positive operating cash flows. Values relevant to a possible liquidation are as follows:   BookValue EstimatedNet RealizableValue Free assets consisting of cash, receivables, and securities. Inventory Equipment (net) Land. Buildings (net) Goodwill Total assets Accounts payable Note payable Accrued interest on mortgage payable Mortgage payable Unsecured creditors with priority. Total liabilities $ 125,000 420,000 180,000 300,000 1,200,000 300,000 $2,525,000 $ 340,000 600,000 24,000 1,000,000 70,000 $2,034,000 $ 85,000 330,000 120,000 350,000 1,000,000   $1,885,000             Of the net realizable value of inventory, $200,000 is pledged against $250,000 of accounts…