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Homework answers / question archive / Southwestern Wear Inc
Southwestern Wear Inc. has the following balance sheet:
Current assets $1,875,000
Accounts payable $375,000
Notes payable 750,000
Subordinated debentures 750,000
Total debt $1,875,000
Common equity 1,875,000
Total assets $3,750,000
Total liabilities and equity $3,750,000
The trustee's costs total $251,500, 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 million is received from sale of the assets?
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 Adj (3) % of Original Claims Received (4) Notes Payable Accounts Payable $$ Subordinate Debentures Total
The remaining $_____ will go to the common stockholders.
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