Quarter Staff is being liquidated under Chapter 7 of the bankruptcy code. When it filed for bankruptcy, its balance sheet (in millions) was as follows:
The notes payable are an unsecured bank loan and the mortgage bond is secured by the land and building. The proceeds from the liquidation of the company's assets are as follows:

If the bankruptcy administration charges were $500,000, what dollar amount will the trade creditors (accounts payable) receive in the liquidation?

Question

Quarter Staff is being liquidated under Chapter 7 of the bankruptcy code. When it filed for bankruptcy, its balance sheet (in millions) was as follows: 
The notes payable are an unsecured bank loan and the mortgage bond is secured by the land and building. The proceeds from the liquidation of the company's assets are as follows:

If the bankruptcy administration charges were $500,000, what dollar amount will the trade creditors (accounts payable) receive in the liquidation?

Quizplus · Accepted Answer

11ea10f6_a195_804b_b6b3_01e741a82636_TB2040_00 
Settlement percentage = $8.3/$10.3 = 0.8058
Available to accounts payable = $4,600,000(.8058) = $3,706,680

Quarter Staff Is Being Liquidated Under Chapter 7 of the Bankruptcy