The Beacon Has Proposed a Reorganization Plan Based on a Going-Concern

question 37

Multiple Choice

The Beacon has proposed a reorganization plan based on a going-concern value of $1.3 million after court costs and delinquent wages and taxes.The proposed financial structure is $400,000 in new mortgage debt,$200,000 in subordinated debt,and $700,000 in new equity.Secured creditors currently have a mortgage lien for $600,000 and the unsecured creditors are owed $950,000.What should the unsecured creditors receive if the reorganization plan is approved?

• A)$700,000 in equity securities
• B)$200,000 in subordinated debt and $700,000 in equity securities
• C)$950,000 in new equity securities
• D)61.3 percent of the new mortgage debt,61.3 percent of the subordinated debt,and 61.3 percent of new equity
• E)82.6 percent of the subordinated debt and 82.6 percent of new equity

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Definitions:

Sales Revenue

The income generated from selling goods or services over a specific period before deducting any costs or expenses.

Accounts Receivable

Payments due to a company from its customers for the provision of goods or services, yet to be paid.

Sales Invoices

Documents issued by a seller to a buyer, detailing products or services sold, quantities, prices, and terms of sale.

Reference Column

A column in a table that is used to cross-reference or link the data in one table with data in another, facilitating data lookup and retrieval.