Question

The following information is available for Clueless Corporation, which has filed for Chapter 7 bankruptcy:

Liabilities:

Administrative expenses payable to trustee (priority)	$ 33,000
Taxes payable (priority)	22,000
Unsecured liabilities	550,000
Fully secured liabilities	190,000
Partially secured liabilities	350,000

Realizable value of assets:          

Assets pledged to fully secured creditors	$ 250,000
Assets pledged to partially secured creditors	275,000
Unsecured assets	80,000

               

                Required

a.            Prepare a statement of affairs for Clueless Corporation.

b.            Calculate the estimated recovery rate (cents on the dollar) for (1) unsecured and (2) partially secured creditors. Round your answers to the nearest tenth of a cent, if necessary.

Answer 1

Statement of affairs of Clueless Corporation
Gross Liabilities	Liabilities (as stated and estimated by the debtor)		Expected to Rank	Assets(as stated and estimated by the debtor)		Estimated to produce
550,000.00	Unsecured Creditors		550,000.00	Unsecured Assets		80,000.00
190,000.00	Fully Secured Creditors	190,000.00		Surplus from securities in the hands of fully secured creditors - contra	60,000.00
	Less: Estimated value of securities	250,000.00		Less: Preferential Creditors
	Balance thereof contra	60,000.00	-	Taxes payable	22,000.00
				Administrative expense payable to trustee	33,000.00	5,000.00
350,000.00	Partly Secured Creditors	350,000.00
	Less:Estimated value of securities	275,000.00	75,000.00
	Preferential Creditors as per contra - paid in full			Deficiency as per the list		540,000.00
22,000.00	Taxes payable	22,000.00
33,000.00	Administrative expense payable to trustee	33,000.00
1,145,000.00			625,000.00		115,000.00	625,000.00
b)	Recovery rate = 85000/625000
	0.136
	Recovery rate for Unsecured Creditors = 0.136 cents per dollar
	Recovery for partially secured creditors
	Amount realised from securities	275,000.00
	Amount realised from recovery	10,200.00
		285,200.00
	Recovery rate = 285200/350000
	0.815
	Particulars	Recovery Rate
	Recovery rate for unsecured creditors	0.14
	Recovery rate for partly secured creditors	0.81