The Southeast Asia Corporation (SAC) is to be liquidated. The market value of its assets is $24 million. Bonds with a face value of $14.6million are unsecured. SAC has no subordinated debentures outstanding; shareholders' equity has a market value of $4 million;$930,000 is used to cover administrative costs and other claims (including unpaid wages, pension benefits, legal fees, and taxes).The company has a liquidating value of $20 million. Of this amount, $12 million represents the proceeds from the sale of their flagshipIndonesian resort.As a trustee in bankruptcy, you wish to follow the bankruptcy law strictly. What is your proposed distribution? (Enter your answers inwhole dollars not in millions. Do not round intermediate calculations. Omit $ sign in your response.)Administrative fees and other claimsBond holdersEquity holdersProposed distribution$$$

The Southeast Asia Corporation (SAC) is facing the unfortunate reality of liquidation. Their…

Answered: The Southeast Asia Corporation (SAC) is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Under the memorandum of incorporation of Greenfield Investments Ltd, the directors had the power to borrow up to R5-million, without the consent of the general meeting. The directors themselves lend R10-million to the company, without such consent, and took debentures. Is the company liable for the R10-million?
LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The market price of Branch’s bonds fell by $456,000 due to concerns about one of the company’s principal drugs. The concerns were justified when the FDA banned the drug. $102,000 of that decline in value already had been included in OCI as a temporary unrealized loss in a prior period. LED views $202,000 of the $456,000 loss as related to credit losses, and the other $254,000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for any credit or noncredit losses in the current period? How should the decline affect net income and comprehensive income?
ABC Company is in a capital deficiency position and is considering the possibility of liquidation. An analysis of the assets and liabilities of the entity is provided: Assets at net realizable value (pledged against liabilities of P150,000) 250,000 Assets at net realizable value (pledged against liabilities of P260,000) 100,000 Assets at net realizable value (not pledged against any liabilities) 160,000 Liabilities with priority 85,000 Unsecured creditors 400,000 Round off the estimated recovery percentage to XX.XX%, if needed. How much is the estimated payment to partially secured creditors?
ABC Company is in financial difficulties and agreed to issue 20,000 of its P20 par value shares in settlement of its loan from a bank of P1,000,000. On this date, the accrued interest not yet paid by ABC Company amounted to P120,000. The fair market value of the shares on this date is P40 per share while the fair market value of the liability is P1,200,000. According to our standards, what amount of gain or loss from extinguishment of debt shall be recognized from this equity swap?
WW Inc. Recently has had financial difficulty and is being liquidated. The firm has a liquidation value of Php 2,000,000 - Php800,000 from the fixed assets that served as collateral for the mortgage bonds and Php 1,200,000 from all other assets (all prior claims have been satisfied). The firm's current capital structure is as follows: Unsecured bonds - Php1,000,000Mortgage bonds - Php800,000Preference shares - Php200,000Ordinary shares - Php500,000 How much will the ordinary shareholders from the liquidation?
Christian Co. is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire P6,000,000 note payable with accrued interest payable of P600,000. Christian Co. has entered into an agreement with the creditor to exchange equity instruments for financial liability. Christian has an option to exchange 300,000 ordinary shares with P5 par value and PI0 market value, and 25,000 preference shares with P10 par value and P60 market value. The fair market value of the financial liability is P5,200,000 and the carrying amount is P5,800,000. What is the gain on extinguishment of the note payable? O a po Ob. P2,100,000 O C PLA00.000 Od PL500,000
At the beginning of year 1, ABC Company raises $80 million of equity and uses the proceeds to buy a fixed asset. Operating profits before depreciation (all received in cash) are expected to be $50 million in year 1, $55 million in year 2, and $60 million in year 3. The firm pays out all operating profits as dividends and pays no taxes. At the end of year 3, the company terminates and has no remaining value. If the firm’s shareholders expect to earn a 10 percent return, what is the value of the firm’s equity using Discounted Dividend Approach?
0 (Based on Appendix 7B) Marshall Companies, Inc., holds a note receivable from a former subsidiary. Dueto financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note.Marshall agreed to restructure the debt by both delaying and reducing remaining cash payments. The concessionsimpair the creditor’s investment in the receivable. How is this impairment recorded?
POP Inc is to be liquidated and has the following liabilities: income taxes payable 42,805 wages payable 157,320 accounts payable (including customers credit balances of 50,000) 1,380,000 bonds payable(including interests of 50,000) 1,250,000 notes payable( excluding interests of 20,000) 670,000 The company's asset is composed of the following at their book values: cash 100,000 accounts receivable(including customer's credit balances mentioned above) 500,000 inventory (used as security for the notes) 330,000 land and building (used as security for the bonds) 1,500,000 comparing to their net realizable values, the followinghas been determined: - 20% of the accounts receivable is worthless - 1/3 of the inventory owned by the company is worthless - land and building is undervalued by 500,000 How much will be recovered by creditors from the account payable? Round off answers to two decimal places
What are possible reasons for a company with $20 million worth of assets that files for chapter 7 bankruptcy and a secured creditor with claims of over $100 million and the building as a secuirty end up with nothing?
Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2,002. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $86,692 on March 28, 2,034, but investors would receive nothing until then. Investors paid RBMCC $22,024 for each of these securities; so they gave up $22,024 on March 28, 2,002, for the promise of a $86,692 payment in 2,034. Suppose that, on March 28, 2,015, this security's price is $45,002. If an investor had purchased it for $22,024 at the offering and sold it on this day, what annual rate of return would she have earned? (Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 2 decimal places. For example, 0.12345 or 12.345% should be entered as 12.35.)

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