Liquidation Southwestern Wear Inc. has the following balancesheet: Current assets $1,875,000 Accounts payable $375,000 Fixedassets 1,875,000 Notes payable 750,000 Subordinated debentures750,000 Total debt $1,875,000 Common equity 1,875,000 Total assets$3,750,000 Total liabilities and equity $3,750,000 The trustee'scosts total $215,500, and the firm has no accrued taxes or wages.Southwestern has no unfunded pension liabilities. The debenturesare subordinated only to the notes payable. If the firm goesbankrupt and liquidates, how much will each class of investorsreceive if a total of $3 million is received from sale of theassets?
Distribution of proceeds on liquidation:
| 1. Proceeds from sale of assets | $ |
| 2. First mortgage, paid from sale of assets | $ | |
| 3. Fees and expenses of administration of bankruptcy | $ | |
4. Wages due workers earned within 3 months
prior to filing of bankruptcy petition | $ | |
| 5. Taxes | $ | |
| 6. Unfunded pension liabilities | $ | |
| 7. Available to general creditors | $ |
Distribution to general creditors:
| Claims of General Creditors |
Claim
(1) | Application of 100% Distribution
(2) | After Subordination Adjustment
(3) | Percentage of Original Claims Received
(4) |
| Notes payable | $ | $ | $ | % |
| Accounts payable | $ | $ | $ | % |
| Subordinated debentures | $ | $ | $ | % |
| Total | $ | $ | $ | |
The remaining $ will go to the common stockholders.
