Solution-Evaluate the distribution of the proceeds

Evaluate the distribution of the proceeds

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Reference no: EM13538674

Distribution in Bankruptcy. Hover Company's balance sheet follows:

ASSETS
Current assets	$1,200,000
Land	3,000,000
Plant and equipment	2,400,000
Total assets	$6,600,000

LIABILITIES AND

STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$ 500,000
Notes payable	1,200,000
Accrued taxes	300,000
Total current liabilities		$2,000,000
Noncurrent liabilities
Mortgage bonds	$1,800,000^a
Debentures	1,000,000
Total noncurrent liabilities		2,800,000
Total liabilities		$4,800,000
Stockholders' equity
Preferred stock	$ 500,000
Common stock	1,300,000
Total stockholders' equity		1,800,000
Total liabilities and stockholders'
equity		$6,600,000

Mortgage bonds are secured against plant and equipment.

The liquidation value for the total assets is $4 million, $1.2 million of which was received for plant and equipment. Bankruptcy costs were $150,000. Determine the distribution of the proceeds.

Reference no: EM13538674

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Evaluate the distribution of the proceeds

Reference no: EM13538674

Reference no: EM13538674

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