Question: The following balance sheet represents Boles Electronics Corpora

The following balance sheet represents Boles Electronics Corporation’s position at the time it filed for bankruptcy (in thousands of dollars):

The mortgage bonds are secured by the plant, but not by the equipment. The subordinated debentures are subordinated to notes payable. The firm was unable to reorganize under Chapter 11; therefore, it was liquidated under Chapter 7. The trustee, whose legal and administrative fees amounted to $200,000, sold off the assets and received the following proceeds (in thousands of dollars):
Asset Proceeds
Plant $1,600
Equipment 1,300
Receivables 50
Inventories 240
Total $3,190
In addition, the firm had $10,000 in cash available for distribution. No single wage earner had over $2,000 in claims, and there were no unfunded pension plan liabilities.
a. What is the total amount available for distribution to all claimants? What is the total of creditor and trustee claims? Will the preferred and common stockholders receive any distributions?
b. Determine the dollar distribution to each creditor and to the trustee. What percentage of each claim is satisfied?
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  • CreatedMarch 18, 2010
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