Explore BrainMass

Explore BrainMass

    Build a Model: Duchon Industries.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Chapter 22. Ch 22-5 Build a Model (Please see attached file)

    Duchon Industries had the following balance sheet at the time it defaulted on its interest payments and filed for liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $900 million, while the current assets were sold for another $400 million. Thus, the total proceeds from the liquidation sales were $1,300 million. Trustee's costs amounted to $1 million; no single worker was due more than $2,000 in wages; and there were no unfunded pension plan liabilities. Determine the amount available for distribution to all claimants.

    Balance Sheets (Millions of Dollars)
    Assets
    Current assets $700
    Net fixed assets 1,300
    Total assets $2,000

    Liabilities and equity
    Accounts payable $80
    Accrued taxes 80
    Accrued wages 70
    Notes payable 400
    Total current liabilities $630
    First-mortgage bondsa 700
    Second-mortgage bondsa 300
    Debentures 500
    Subordinated debenturesb 200
    Common stock 100
    Retained Earnings (430)
    Total claims $2,000

    a All fixed assets are pledged as collateral to the mortgage bonds.
    b Subordinated to notes payable only.

    Other inputs (in thousands of dollars):

    Proceeds from sale of fixed assets = $900
    Proceeds from sale of current assets = $401
    Trustee's costs = $1

    Total claims (including trustee expenses)
    Total cash from liquidation
    Amount available for distribution to shareholders

    Initital Distribution to Priority Claimants

    Priority claims:

    Trustee's expenses
    Worker's wages due
    Government taxes due

    Distribution to first mortgage (paid from sale of fixed assets)
    Remaining proceeds from sale of fixed assets after satisfying first mortgage holders

    In the attached file, the "empty" cells need to be filled
    Distribution to second mortgage (paid from sale of fixed assets after satisfying first mortgage holders)

    Remaining proceeds from sale of fixed assets after satisfying first and second mortgage holders

    Total preliminary distributions to priority claimaints

    Total of satisfied priority claims
    Total unsastified claims from all claimants
    Funds available for distribution to general creditors:
    Pro rata distribution percentage

    Distributions due to general claims: Distribution after Subordination Adjustment
    Remaining Unsatisfied Claim
    Amount of Claim Pro Rata Distribution Subordination Adjustment

    Unsatisfied first mortgage
    Unsatisfied second mortgage
    Accounts payable
    Notes payable
    Debentures
    Subordinated debentures

    Total

    Total distributions (including prior distributions to mortgage holders and subordination adjustment):

    Percent of Claim Satisfied
    Total Distribution Original Claim

    First mortgage $700
    Second mortgage $300
    Accounts payable $80
    Notes payable $400
    Debentures $500
    Subordinated debentures $200

    © BrainMass Inc. brainmass.com October 2, 2020, 3:33 am ad1c9bdddf
    https://brainmass.com/business/current-assets/build-model-duchon-industries-499427

    Attachments

    Solution Summary

    The expert builds a model for Duchon Industries.

    $2.19

    ADVERTISEMENT