Distribution in Bankruptcy. Hover Company's balance sheet follows:
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ASSETS
|
|
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Current assets
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$1,200,000
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|
Land
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3,000,000
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Plant and equipment
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2,400,000
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Total assets
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$6,600,000
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LIABILITIES AND
STOCKHOLDERS' EQUITY
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Current liabilities
|
|
|
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Accounts payable
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$ 500,000
|
|
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Notes payable
|
1,200,000
|
|
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Accrued taxes
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300,000
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|
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Total current liabilities
|
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$2,000,000
|
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Noncurrent liabilities
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|
|
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Mortgage bonds
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$1,800,000a
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|
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Debentures
|
1,000,000
|
|
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Total noncurrent liabilities
|
|
2,800,000
|
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Total liabilities
|
|
$4,800,000
|
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Stockholders' equity
|
|
|
|
Preferred stock
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$ 500,000
|
|
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Common stock
|
1,300,000
|
|
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Total stockholders' equity
|
|
1,800,000
|
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Total liabilities and stockholders'
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|
|
|
equity
|
|
$6,600,000
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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.