Consider Failures Galore, Inc. (Tables 23.10 and 23.11), discussed in this chapter.

a. If total liquidation proceeds are $5.95 million, what is the distribution of these proceeds among the various creditors of Failures Galore?

b. If total liquidation proceeds are $7.65 million, what is the distribution of these proceeds among the various creditors of Failures Galore?

*The subordinated debentures are subordinate to the bank notes payable. Assume that all the accrued wages can be paid out of the liquidationproceeds.

Table 23.10 Balance Sheet, Failures Galore, Inc. Liablities and Equity Assets Current assets Flxed assets, net 6,000,000 Accounts payable 6500.0 Bank notes payable $ 2.000,000 2,000,000 200,000 300,000 2,000,000 Accrued wages Accrued taxes Mortgage bonds Debentures Subordinated debentures Preferred stock Common equity 2,000,00 2,000,000 1,000,000 Total assets $12,500.000 Liablities and equity $12,500000 Table 23.I1 Distribution of the Proceeds from the Liquidation of Failures Galore, Inc. $6,800,000 $ 550,000 200,000 Total liquidation proceeds . Bankruptcy administration expenses 2. Wages owed to employees 3. Taxes owed to governments Total priority clalms Funds avallable for clalms of creditors 4. Payment to mortgage bondholders (proceeds from sale of secured assets) $5,750,000 1500,000 Funds avallable for clalms of general and unsecured creditors Funds avallable for general and unsecured creditors Settlement percentage for general and unsecured creditors Total clalms of general and unsecured creditors $4,250,000 $8,500,000 50% 50% of Claim (Before 50% of Claim (After Accounts payable Bank notes payable Mortgage bonds Total Clalm $2,000.000 2,000.000 500,000 $1,000,000 1,000,000 250,000 1,000,000 $1,000,000 250,000 1,000,000 $4.250000 50 $4.250,000 Funds avallable for preferred and common stockholders