Problem: Tundra Tots is being liquidated under Chapter of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets are sold for $25,000,000 and current assets are sold for $18,000,000. All fixed assets are pledged as collateral for mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $500,000. No employee is owed over $2,000.
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Before |
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|
Before |
|
Default |
|
Balance Sheet |
Default |
| Current Assets |
26,000,000 |
|
Accounts payable |
4,000,000 |
| Net fixed assets |
50,000,000 |
|
Accrued taxes |
90,000 |
|
|
|
Accrued wages |
250,000 |
|
|
|
Notes payable |
1,650,000 |
|
|
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Total current liabilities |
5,990,000 |
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|
|
First-mortgage bonds |
18,000,000 |
|
|
|
Second-mortgage bonds |
20,000,000 |
|
|
|
Debentures |
15,000,000 |
|
|
|
Subordinated debentures |
14,000,000 |
|
|
|
Common stock |
2,500,000 |
|
|
|
Retained earnings |
510,000 |
| Total assets |
76,000,000 |
|
Total claims |
76,000,000 |
a. How much will SHs receive?
b. How much will mortgage bondholders receive?
c. How much will priority creditors receive?
d. Identify the remaining general creditors. How much will each receive before subordination adjustment and after adjustment?