CCP 472 Test Bank Chapter 18 s) Lesher Corporation lost their primary contract a

Question

CCP 472 Test Bank Chapter 18 s) Lesher Corporation lost their primary contract and entered into voluntary Chapter 7 bankruptcy in the early part of 2014. By July 1, all assets were converted into cash, the secured creditors were paid, and $124,500 in cash was left to pay the remaining claims as follows: Accounts payable Claims incurred between the date of filing an involuntary bankruptcy petition and the date an interim trustee is appointed Payroll taxes withheld $ 50,000 8,000 14,000 Wages payable (all under $10,000 per employee; earned within 90 days of filing bankruptcy petition) Unsecured note payable Accrued interest on the note payable Administrative expenses of the trustee Total 56,000 37,500 2,000 22.000 Required: Classify the claims by their Chapter 7 priority ranking, and analyze which amounts will be paid and which amounts will be written off.

Explanation / Answer

First priority shall be :

Administrative expenses of the trustee: 22000

Clams incurred between the date of filing an involuntary bankruptcy and interim trustee: 8000

Wages payable: 56000

Payroll taxes: 14000

Accounts payable: 24500 for trade payables, remaining balance of 25,500 shall be written off

Unsecured bond and interets on the same shall be written off

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