24-6: Liquidation in Bankruptcy 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 debt Common equity $3,750,000 Total liabilities & equity Total assets The trustee's costs total $338,250, 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 $3.0 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 $ $ 375,000 750,000 750,000 $ $1,875,000 1,875,000 $3,750,000
24-6: Liquidation in Bankruptcy 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 debt Common equity $3,750,000 Total liabilities & equity Total assets The trustee's costs total $338,250, 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 $3.0 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 $ $ 375,000 750,000 750,000 $ $1,875,000 1,875,000 $3,750,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:24-6: Liquidation in Bankruptcy
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 debt
Common equity
$3,750,000 Total liabilities & equity
Total assets
The trustee's costs total $338,250, 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 $3.0 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
$
$ 375,000
750,000
750,000
$
$1,875,000
1,875,000
$3,750,000
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