1. Liquidations in bankruptcy Aa Aa When a business is worth more if its assets
ID: 2559874 • Letter: 1
Question
1. Liquidations in bankruptcy Aa Aa When a business is worth more if its assets are sold than if it continues to operate, then the business is liquidated, and the proceeds from the sale are used to satisfy any outstanding debt. Liquidation occurs when businesses file for bankruptcy under Chapter 7 of the Federal Bankruptcy Reform Act. This act provides for an equitable distribution of the debtor's assets among the creditors. The distribution of assets is governed by a certain priority of claims. Which of the following claimants has the highest priority according to Chapter 7? O Past-due property taxes O Unsecured claims for customer deposits O Secured creditors Federal taxes due Hungry Whale Electronics has been in financial distress for the past three years. The company's reorganization plans were rejected, and the bankruptcy court is forcing Hungry Whale Electronics to liquidate its assets and settle creditor claims The court appointed the trustee with an estimated expense budget of $421,875. Subordinated debentures are subordinated only to the notes payable.Explanation / Answer
1.Fedral Tax Dues has highest Priority under chaper 7 because it is necessary to file and pay your fedral tax in time and whille filing bankruptcy it help you because it will not charge any interest and penlty on the Due amount if your are regular fedral tax payment.
2. Stockholder will receive on Lquidation= $ 37,500,000 (Amount Realised) Less $ 421,875 (Estimated Expenses) Less $ 563,000 (Accounts Payable) Less $ 1,125,000 (Notes Payable) Less $ 1,125,000 (Subordinate Debentures)
= $ 515,125 (Amount Recevied By Stock Holder on Liqudation)
3. Reorganization would likely push by bankruptcy court if whale electronics were a public utility company or a railroad service company instead of an industrial corporation because if a public utility company will liquidate than it will have negative impact on public it better to reorganise than liquidate.
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