At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet shown here (in thousands of dollars). The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustees costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities.

a. How much will McDaniels shareholders receive from the liquidation?

b. How much will the first mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? c. How much will the second mortgage bondholders receive from collateralized assets? Will they receive their full claim? If not, how much is their remaining claim? d. Who are the other priority claimants (in addition to the mortgage bondholders)? How much will they receive from the liquidation? e. Who are the remaining general creditors? How much will each receive from the distribution before subordination adjustment? How much will each receive after subordination? How much in total will the second mortgage holders receive (include the amount received from collateral

Chapter 24 Bankruptcy, Reorganization, and Liquidation the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee's costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Balance Sheet (Thousands of Dollars) Current assets $ 400 Net fixed assets 600 $ 300 Accounts payable Accrued taxes Accrued wages Notes payable Total current liabilities First-mortgage bonds Second-mortgage bonds Debentures Subordinated debentures Common stock Retained earnings Total liabilities & equity 200 (150) $1,000 Total assets $1,000 Notes: *All fixed assets are pledged as collateral to the mortgage bonds. Subordinated to notes payable only. Chapter 24 Bankruptcy, Reorganization, and Liquidation the mortgage bondholders, brought in $400,000, while the current assets were sold for another $200,000. Thus, the total proceeds from the liquidation sale were $600,000. The trustee's costs amounted to $50,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities. Balance Sheet (Thousands of Dollars) Current assets $ 400 Net fixed assets 600 $ 300 Accounts payable Accrued taxes Accrued wages Notes payable Total current liabilities First-mortgage bonds Second-mortgage bonds Debentures Subordinated debentures Common stock Retained earnings Total liabilities & equity 200 (150) $1,000 Total assets $1,000 Notes: *All fixed assets are pledged as collateral to the mortgage bonds. Subordinated to notes payable only