Below is the balance sheet for Loser, Inc. Loser, Inc. is an insolvent company in bankruptcy that is about to be liquidated under Chapter 7 of the bankruptcy code. All of the asset values on the balance sheet are based on liquidation value. The proceeds from the liquidation will be apportioned to the creditors based on their priority. There are only two priority considerations: 1) the bank loan is secured by the accounts receivable and the inventory; 2) the long-term debt is subordinated to the claims of all other creditors. Calculate how much each of the following claimants will receive when the company is liquidated. Type in your answers to each.

a. What is the total amount received by all trade creditors from liquidation?

b. What is the amount received by the bank from liquidation?

c. What is the amount received by the long-term lender from liquidation?

d. What is the amount received by the stockholders from liquidation?

Loser, Inc.
Balance Sheet - Liquidation Values
(000's omitted)
Accounts Receivable	$ 7,500		Accounts Payable	$ 20,250
Inventory	6,900		Bank Loan	19,300
Equipment	7,500		Long-term Debt	5,000
Real Estate	6,000		Total Debt	$ 44,550
			Stockhloders' Equity	$ (16,650)
Total Assets	$ 27,900		Total Debt & S.E.	$ 27,900

Answer rating: 100% (QA)

To calculate the amounts received by each claimant during liquidation we need to consider the priority of claims and the available assets a Total amou... View the full answer