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Excel Online Structured Activity: Liquidation

At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the balance sheet provided in the Microsoft Excel Online file below. The court, after trying unsuccessfully to reorganize the firm, decided that the only recourse was liquidation. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $330,000, while the current assets were sold for another $150,000. Thus, the total proceeds from the liquidation sale were $480,000. The trustee's costs amounted to $70,000; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

1. How much will McDaniel's shareholders receive from the liquidation? If your answer is zero, enter "0". Round your answer to the nearest dollar.

   $ fill in the blank 2

2. How much will the mortgage bondholders receive? If your answer is zero, enter "0". Round your answer to the nearest dollar.

   $ fill in the blank 3

3. How much will other priority claimants receive from the liquidation? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Claimant	Amount
   Trustee's expenses	$ fill in the blank 4
   Workers' wages due	$ fill in the blank 5
   Governments' taxes due	$ fill in the blank 6
   Total	$ fill in the blank 7

4. How much will the remaining general creditors receive from the distribution before subordination adjustment? If your answer is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest dollar.

   Account	Amount Received
   Accounts payable	$ fill in the blank 8
   Notes payable	$ fill in the blank 9
   Second mortgage bonds	$ fill in the blank 10
   Debentures	$ fill in the blank 11
   Subordinated debentures	$ fill in the blank 12
   Total	$ fill in the blank 13

   What is the effect of adjusting for subordination? If your answer is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest dollar.

   Account	Amount Received after subordination adjustment
   Notes payable	$ fill in the blank 14
   Subordinated debentures	$ fill in the blank 15

Excel template - Saved Search (Option +) File Home Insert Draw Page Layout Formulas Data Review View Heln Editing Comm Arial 10 B A... Currency 8 Ev T Ov D28 A B C D E F G H I 1 Liquidation Proceeds from sale of fixed assets Proceeds from sale of current assets Trustee's costs 6 Any single worker due more than $2,000 in wages? 7 Any unfunded pension plan liabilities? $330,000 $150,000 $70,000 No NO Balance Sheet: 10 Current assets $400,000 NMONS AARNA 12 13 14 15 Net fixed assets 16 17 18 19 600,000 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 claims $50,000 40,000 30,000 180,000 $300,000 300,000 200,000 200,000 100,000 50,000 - 150,000 $1,000,000 21 Total assets $1,000,000 22 23 Nolus: 24 * All fixed assets are pledged as collateral to the mortgage bonds. 25 Subordinated to notes payable only. Formulas #N/A $330,000 #N/A #N/A $0 $330,000 27 Distribution to Common Shareholders: 28 Amount distributed to common shareholders 29 30 Distribution to Mortgage Bondholders: 31 Proceeds from sale of fixed assets 32 Less: 33 First mortgage (paid from sale of fixed assets) 34 Second mortgage (paid from sale of fixed assets) 35 Total funds distributed to mortgage bondholders 36 37 Funds available from fixed assets proceeds after distribution to bondholders 38 39 Distribution to Priority Claimants: 40 Proceeds from sale of assets after distribution to mortgage bondholders 41 Less: 42 Fees and expenses of bankruptcy 43 Wages due to workers within 3 months of bankruptcy 44 Taxes due to federal, state, and local governments 45 Total funds distributed to priority claimants 46 47 Funds available for distribution to general creditors 48 49 Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A En 51 Distribution to General Creditors: Pro Rata Distribution Before Subordination Adjustment Percentage of Original Claim Received Total Amount Received Amount of Claim Distribution after Subordination Adjustment $0 0 0 50,000 180,000 0 52 General Creditors' Claims 53 Unsatisfied portion of first mortgage 54 Accounts payable 55 Notes payable (to banks) 56 Second mortgage 57 Debentures 58 Subordinated debentures 59 Total claims 60 61 Formulas 0 0 0 200,000 100,000 $530,000 0 $0 Distribution after Subordination Adjustment Amount of Claim #N/A Total Amount Received #N/A Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A Percentage of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #N/A 62 General Creditors' Claims 63 Unsatisfied portion of first mortgage 64 Accounts payable 65 Notes payable (to banks) 66 Second mortgage 67 Debentures 68 Subordinated debentures 69 Total claims 70 71 #N/A #N/A #N/A Excel template - Saved Search (Option +) File Home Insert Draw Page Layout Formulas Data Review View Heln Editing Comm Arial 10 B A... Currency 8 Ev T Ov D28 A B C D E F G H I 1 Liquidation Proceeds from sale of fixed assets Proceeds from sale of current assets Trustee's costs 6 Any single worker due more than $2,000 in wages? 7 Any unfunded pension plan liabilities? $330,000 $150,000 $70,000 No NO Balance Sheet: 10 Current assets $400,000 NMONS AARNA 12 13 14 15 Net fixed assets 16 17 18 19 600,000 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 claims $50,000 40,000 30,000 180,000 $300,000 300,000 200,000 200,000 100,000 50,000 - 150,000 $1,000,000 21 Total assets $1,000,000 22 23 Nolus: 24 * All fixed assets are pledged as collateral to the mortgage bonds. 25 Subordinated to notes payable only. Formulas #N/A $330,000 #N/A #N/A $0 $330,000 27 Distribution to Common Shareholders: 28 Amount distributed to common shareholders 29 30 Distribution to Mortgage Bondholders: 31 Proceeds from sale of fixed assets 32 Less: 33 First mortgage (paid from sale of fixed assets) 34 Second mortgage (paid from sale of fixed assets) 35 Total funds distributed to mortgage bondholders 36 37 Funds available from fixed assets proceeds after distribution to bondholders 38 39 Distribution to Priority Claimants: 40 Proceeds from sale of assets after distribution to mortgage bondholders 41 Less: 42 Fees and expenses of bankruptcy 43 Wages due to workers within 3 months of bankruptcy 44 Taxes due to federal, state, and local governments 45 Total funds distributed to priority claimants 46 47 Funds available for distribution to general creditors 48 49 Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A En 51 Distribution to General Creditors: Pro Rata Distribution Before Subordination Adjustment Percentage of Original Claim Received Total Amount Received Amount of Claim Distribution after Subordination Adjustment $0 0 0 50,000 180,000 0 52 General Creditors' Claims 53 Unsatisfied portion of first mortgage 54 Accounts payable 55 Notes payable (to banks) 56 Second mortgage 57 Debentures 58 Subordinated debentures 59 Total claims 60 61 Formulas 0 0 0 200,000 100,000 $530,000 0 $0 Distribution after Subordination Adjustment Amount of Claim #N/A Total Amount Received #N/A Pro Rata Distribution Before Subordination Adjustment #N/A #N/A #N/A #N/A #N/A #N/A #N/A Percentage of Original Claim Received #N/A #N/A #N/A #N/A #N/A #N/A #N/A 62 General Creditors' Claims 63 Unsatisfied portion of first mortgage 64 Accounts payable 65 Notes payable (to banks) 66 Second mortgage 67 Debentures 68 Subordinated debentures 69 Total claims 70 71 #N/A #N/A #N/A