Assets

$$Book Value$$Liquidation Value

Accounts receivable$$$$1,400,000$$$1,200,000$

Inventory$1,800,000900,000$

Machinery and equipment$1,100,000600,000$

Building and plant$4,200,0002,500,000$

Total assets$$$$8,500,000$$$5,200,000$

Liabilities and Stockholders$$ Claims

Liabilities:$$

Accounts payable$$$$2,800,000$

First lien, secured by machinery and equipment$900,000$

Senior unsecured debt$2,200,000$

Subordinated debenture$1,700,000$

Total liabilities$$$$7,600,000$

Stockholders$$ claims:$$

Preferred stock$$$$250,000$

Common stock$650,000$

Total stockholders$$ claims$$$$900,000$

Total liabilities and stockholders$$ claims$$$$8,500,000$

After the machinery and equipment are sold to partially cover the first lien secured claim, how much will be available from the remaining asset liquidation values to cover unsatisfied secured claims and unsecured debt?

List the remaining asset claims of unsatisfied secured debt holders and unsecured debt holders.

Compute a ratio of your answers in the above two answers. This will indicate the initial allocation ratio.

List th remaining claims $($unsatisfied secured and unsecured$)$ and make an initial allocation and final allocation. Subordinated debenture holders may keep the balance after full payment is made to senior debt holders.

Show the relationship of amount received to total amount of claim. Remember to use the sales $($liquidation$)$ value for machinery and equipment plus the allocation amount in the above question to arrive at the total received on secured debt.