At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the following balance sheet shown below…

At the time it defaulted on its interest payments and filed for bankruptcy, the McDaniel Mining Company had the following balance sheet shown below (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 $350,000, while the current assets were sold for another $330,000. Thus, the total proceeds from the liquidation sale were $680,000. The trustee’s costs amounted to $70,000; no single worker was due more than the maximum allowable wages per worker; and there were no unfunded pension plan liabilities.

Current assets$  400 Account payable$   50Net fixed assets600 Accrued taxes40   Accrued wages30   Notes payable180    Total current liabilities$  300   First-mortgage bonds*300   Second-mortgage bonds*200   Debentures200   Subordinated debentures**100   Common stock50   Retained earnings-150Total assets$1,000 Total claims$1,000Notes: 

*All fixed assets are pledged as collateral to the mortgage bonds.

a. How much will McDaniel’s shareholders receive from the liquidation? Round your answer to the nearest dollar.

b. How much will the mortgage bondholders receive? Round your answer to the nearest dollar.

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

ClaimantAmount

  1. Trustee’s expenses $
  2. Workers’ wages due $
  3. Governments’ taxes due $
  4. Total $

d. How much will the remaining general creditors receive from the distribution before subordination adjustment? Round your answers to the nearest dollar. Do not round intermediate calculations.

AccountAmount Received

  1. Accounts payable $
  2. Notes payable $
  3. Second mortgage bonds $
  4. Debentures $
  5. Subordinated debentures $
  6. Total $

What is the effect of adjusting for subordination? Round your answers to the nearest dollar. Do not round intermediate calculations.

AccountAmount Received after subordination adjustment

  1. Notes payable $ –
  2. Subordinated debentures $