Question

Holdingon Corporation is entering bankruptcy under Chapter 7 of the bankruptcy laws. The following information is...

Holdingon Corporation is entering bankruptcy under Chapter 7 of the bankruptcy laws. The following information is available:

           

            Realizable value of assets pledged to fully-secured creditors                        $700,000

            Realizable value of assets pledged to partially-secured creditors                   300,000

            Realizable value of unsecured assets                                                              150,000

            Liabilities, fully secured                                                                                  520,000

            Liabilities, partially secured                                                                            800,000

            Liabilities, unsecured with priority                                                                     40,000

            Liabilities, unsecured                                                                                      500,000

Determine the following amounts:

a. Net free assets

b. Total unsecured liabilities

c. Estimated deficiency to unsecured creditors

Business   Accounting   
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Answer #1
a) Net Free Assets = Total Assets - Pledged Liability - Priority Liabilities
(700000-520000) + 300000 + 150000- 40000
590000
b) Total Unsecured Liabilities = (800000-300000)+40000+500000
1040000
c) Estimated Deficiency to unsecured creditors = Net free Assets - Total Unsecured liabilities
590000-1040000
-450000
Estimated Deficiency = 450000
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