Liquidation Assignment | Top Universities
January 23rd, 2020
Liquidation
Southwestern Wear Inc. has the following balance sheet:
| Current assets | $1,875,000 | Accounts payable | $375,000 | |
| Fixed assets | 1,875,000 | 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 $297,250, 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 $4 million is received from sale of the assets?
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. Get Accounting homework help today
