Liquidation Southwestern Wear Inc. has the following balance sheet: $1,875,000 Accounts payable 1,875,000 Notes payable Current assets Fixed assets Subordinated debentures Total debt Common equity Total assets $3,750,000 Total liabilities & equity The trustee's costs total $346,000, 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 goe bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 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
Liquidation Southwestern Wear Inc. has the following balance sheet: $1,875,000 Accounts payable 1,875,000 Notes payable Current assets Fixed assets Subordinated debentures Total debt Common equity Total assets $3,750,000 Total liabilities & equity The trustee's costs total $346,000, 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 goe bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 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
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter24: Bankruptcy, Reorganization, And Liquidation
Section: Chapter Questions
Problem 1P: Southwestern Wear Inc. has the following balance sheet: The trustees costs total 281,250, and the...
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Question
Accounting
![Liquidation
Southwestern Wear Inc. has the following balance sheet:
$1,875,000 Accounts payable
1,875,000
Notes payable
Current assets
Fixed assets
Subordinated debentures
Total debt
Common equity
$3,750,000 Total liabilities & equity
Total assets
The trustee's costs total $346,000, 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 $2.3 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01d01b29-ede7-42ba-8dcd-8c0b18e94cc8%2Fd12534ec-920e-419a-814c-df7c2fc811ae%2Fs50zqr5_processed.png&w=3840&q=75)
Transcribed Image Text:Liquidation
Southwestern Wear Inc. has the following balance sheet:
$1,875,000 Accounts payable
1,875,000
Notes payable
Current assets
Fixed assets
Subordinated debentures
Total debt
Common equity
$3,750,000 Total liabilities & equity
Total assets
The trustee's costs total $346,000, 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 $2.3 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
![Distribution to general creditors:
General Creditors'
Claims
(1)
Accounts payable
Notes payable
Subordinated
debentures
Total
Amount of Claim
(2)
$
$
Application of 100%
Distribution
(3)
$
$
Distribution after
Subordination
Adjustment
(4)
$
$
Percentage of
Original Claim
Received
(5)
Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.
The remaining $
will go to the common stockholders. They will receive only
%
% of the amount of equity on the balance sheet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01d01b29-ede7-42ba-8dcd-8c0b18e94cc8%2Fd12534ec-920e-419a-814c-df7c2fc811ae%2Fskigrm_processed.png&w=3840&q=75)
Transcribed Image Text:Distribution to general creditors:
General Creditors'
Claims
(1)
Accounts payable
Notes payable
Subordinated
debentures
Total
Amount of Claim
(2)
$
$
Application of 100%
Distribution
(3)
$
$
Distribution after
Subordination
Adjustment
(4)
$
$
Percentage of
Original Claim
Received
(5)
Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.
The remaining $
will go to the common stockholders. They will receive only
%
% of the amount of equity on the balance sheet.
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