Quarter Staff is being liquidated under Chapter 7 of the bankruptcy code.When it filed for bankruptcy, its balance sheet (in millions) was as follows:

The notes payable are an unsecured bank loan and the mortgage bond is secured by the land and building.The proceeds from the liquidation of the company's assets are as follows:

If the bankruptcy administration charges were $500,000, what dollar amount will the trade creditors (accounts payable) receive in the liquidation?
A)$1.65 million
B)$3.71 million
C)$4.60 million
D)$2.55 million

Question

Quarter Staff is being liquidated under Chapter 7 of the bankruptcy code.When it filed for bankruptcy, its balance sheet (in millions) was as follows:

The notes payable are an unsecured bank loan and the mortgage bond is secured by the land and building.The proceeds from the liquidation of the company's assets are as follows:

If the bankruptcy administration charges were $500,000, what dollar amount will the trade creditors (accounts payable) receive in the liquidation?
A)$1.65 million 
B)$3.71 million 
C)$4.60 million 
D)$2.55 million

Quizplus · Accepted Answer

Total liquidation proceeds $13,800,000
 11ea4079_5161_4111_87fe_fb6fd6270284_TB2041_00 
 11ea4079_5161_6822_87fe_c594fc6fa533_TB2041_00 
Settlement percentage = $8.3/$10.3 = 0.8058
Available to accounts payable = $4,600,000(0.8058) = $3,706,680

Quarter Staff Is Being Liquidated Under Chapter 7 of the Bankruptcy