Evaluate the distribution of the proceedsCost Accounting
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 | $1,800,000a | |
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.