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Mondesto Company has the following debts: Unsecured creditors $ 248,000 Liabilities with priority 128,000 Secured liabilities:...

Mondesto Company has the following debts: Unsecured creditors $ 248,000 Liabilities with priority 128,000 Secured liabilities: Debt 1, $246,000; value of pledged asset 198,000 Debt 2, $206,000; value of pledged asset 118,000 Debt 3, $138,000; value of pledged asset 176,000 The company also has a number of other assets that are not pledged in any way. The creditors holding Debt 2 want to receive at least $170,800. For how much do these free assets have to be sold so that the creditors associated with Debt 2 receive exactly $170,800?

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Answer #1

Unsecured Creditors= 248000


Unsecured creditors from Debt 1($246,000-$198,000) =$48,000

Unsecured creditors from Debt 2($206,000-$118,000) =$88,000


Unsecured creditors from Debt 3($138,000-$176,000) =-$38,000

Total unsecured creditors=$346,000 (Unsecured Creditors+ Unscecured creditors from debit1+ Unsecured creditorsfrom debit2- Unsecred creditors from debit 3)

Percentage of cash Debt 2 need to receive=$(170,800-118,000)/$88,000

=$52,800/$88,000 = 60%

Money ought to receive for unsecured creditors and liability with priorities from sale of free assets:

Money required for liabilities with priorities=$1,28,000

Money required for unsecured creditors (346,000×60/100)

=$207600

Total cash required from sale of freed assets

($128,000+$207600)=$3,35,600

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