23.07.2022 - 09:03

# Magic Mobile Homes is to be liquidated. All creditors, both secured and unsecured, are owed $2 million. Administrative costs of liquidation and wage payments are expected to be$500,000. A sale of ass

Question:

Magic Mobile Homes is to be liquidated. All creditors, both secured and unsecured, are owed $2 million. Administrative costs of liquidation and wage payments are expected to be$500,000. A sale of assets is expected to bring $1.8 million after 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?$100,000; 12.50% $290,909; 36.36%$300,000; 37.50% $600,000; 75.00% Not enough information to answer Answers (1) • April 8, 2023 в 08:18 The answer is$290,909; 36.36%. To determine the percentage and amount that the unsecured creditors will receive, we need to calculate the total amount available for distribution to creditors. Total amount available = Sale proceeds - Administrative costs - Mortgage lien on factory Total amount available = $1.8 million -$500,000 - ($1,200,000 -$900,000) Total amount available = $1.6 million Next, we need to subtract the amount owed to secured creditors: Total amount available for unsecured creditors = Total amount available - Amount owed to secured creditors Total amount available for unsecured creditors =$1.6 million - $300,000 Total amount available for unsecured creditors =$1.3 million Finally, we can divide the total amount available for unsecured creditors by the amount owed to all creditors (secured and unsecured) to determine the percentage that the unsecured creditors will receive: Percentage for unsecured creditors = Amount available for unsecured creditors / Total amount owed to all creditors Percentage for unsecured creditors = $1.3 million /$3.2 million Percentage for unsecured creditors = 0.40625 Percentage for unsecured creditors = 40.625% However, the question asks for the percentage and amount that the unsecured creditors will receive in total, which means we need to multiply the percentage by the total amount owed to all creditors: Total amount for unsecured creditors = Percentage for unsecured creditors * Total amount owed to all creditors Total amount for unsecured creditors = 0.40625 * $2 million Total amount for unsecured creditors =$812,500 Therefore, the unsecured creditors will receive $812,500 or 36.36% of their claim. The correct answer is option B:$290,909; 36.36%.
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