Magic Mobile Homes is to be liquidated.All creditors, both secured and unsecured, are owed €2 million.Administrative costs of liquidation and wages payments are expected to be €500,000.A
Sale of assets is expected to bring €1.8 million after all costs and taxes.Secured creditors have a
Mortgage lien for €1,200,000 on the factory which will be liquidated for €900,000 out of the sale
Proceeds.The corporate tax rate is 34%.How much and what percentage of their claim will the
Unsecured creditors receive, in total?

Question

Quizplus · Accepted Answer

The unsecured creditors will receive €290,909, which is 36.36% of their claim.The total amount available to unsecured creditors is €1.8 million (sale of assets) - €900,000 (secured creditors' claim) - €500,000 (administrative costs and wages) = €400,000.The unsecured creditors' claim is €2 million, so they will receive 400,000/2,000,000 * 100 = 36.36% of their claim.

Magic Mobile Homes Is to Be Liquidated