Tundra Tots Solution-Tundra Tots is being liquidated under Chapter 7 of the Bankruptcy Act

Tundra Tots is being liquidated under Chapter 7 of the Bankruptcy Act. Its current balance sheet is shown below. Fixed assets are sold for $25,000,000 and current assets are sold for $18,000,000. All fixed assets are pledged as collateral for all mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $500,000. No employee is owed over $2,000.

Sale of current assets 38,000,000

Sale of fixed assets 25,000,000

Trustee costs 500,000

Current Assets
Net fixed assets

Before
Default
75,000,000
50,000,000

Total assets

125,000,000

Balance Sheet
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

Before
Default
15,000,000
10,000
550,000
3,800,000
19,360,000
18,000,000
20,000,000
45,000,000
14,000,000
2,500,000
6,140,000
125,000,000

a. How much will SHs receive?
b. How much will mortgage bondholders receive?

c. How much will priority creditors receive?

d. Identify the remaining general creditors. How much will each receive before subordination adjustment?

e. How much will each of the general creditors receive after subordination adjustment?

Tundra Tots Solution-Tundra Tots is being liquidated under Chapter 7 of the Bankruptcy Act

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