Question

Chapter 30 4. Patricia's Paddle Boats is to be liquidated. All creditors, both secured and unsecured, are owed $2,100,000. Administrative costs of liquidation and wage payments are expected to be $750,000. A sale of assets is expected to bring $2,500,000 after taxes. Secured creditors have a mortgage lien for $1,900,000 on the factory which will be liquidated for $1,200,000 out of the sale proceeds. The corporate tax rate is 40%. How much and what percentage of their claim will the unsecured creditors receive, in total?

Answer 1

evenue from factory, post tax = 8 1,200,000 X GOL = $720,000 @ @ Revenue from sale of assets a $2,500,000 Liquidation expenses = $750,000 Amount available =( atb-c) = $ 2490,000 ol Total crediten Due to = soured & unsecured $ 2,100,000 Amount due to unsecured 2,100000 - • B 2,00.000 creditor 1,900,000 is Since due, available 100% of amount unsecured more than creditors can total be paid.