Use the following information for Questions bellow
Givingup Company is entering bankruptcy under Chapter 7 of the bankruptcy laws. The following information is available:
$$\begin{array} { l r }
\text { Realizable value of assets pledg ed to fully-secured creditors } & \$ 600,000 \
\text { Realizable value of assets pledged to partially-secured creditors } & 350,000 \
\text { Realizable value of unsecured assets } & 282,500 \
\text { Liabilities, fully secured } & 500,000 \
\text { Liabilities, partially secured } & 900,000 \
\text { Liabilities, unsecured with priority } & 50,000 \
\text { Liabilities, unsecured } & 400,000
\end{array}$$
-Givingup's statement of affairs reports net free assets of:

Question

Use the following information for Questions bellow
Givingup Company is entering bankruptcy under Chapter 7 of the bankruptcy laws. The following information is available:
 $$\begin{array} { l r } 
\text { Realizable value of assets pledg ed to fully-secured creditors } & \$ 600,000 \
\text { Realizable value of assets pledged to partially-secured creditors } & 350,000 \
\text { Realizable value of unsecured assets } & 282,500 \
\text { Liabilities, fully secured } & 500,000 \
\text { Liabilities, partially secured } & 900,000 \
\text { Liabilities, unsecured with priority } & 50,000 \
\text { Liabilities, unsecured } & 400,000
\end{array}$$
-Givingup's statement of affairs reports net free assets of:

Quizplus · Accepted Answer

Net free assets are calculated by subtracting the total liabilities from the total realizable value of assets. Here, fully-secured creditors will receive $600,000, covering their $500,000 claim. Partially-secured creditors have $350,000 from pledged assets, leaving a $550,000 deficit to be covered by unsecured assets. After paying $50,000 to unsecured creditors with priority, the remaining unsecured assets are $282,500 - $50,000 = $232,500. This amount is insufficient to cover the remaining claim of partially-secured creditors, so they receive the entire $232,500, leaving no net free assets for other unsecured creditors. However, the calculation for net free assets should consider the excess from fully-secured creditors ($600,000 - $500,000 = $100,000) and the unsecured assets ($282,500), totaling $382,500. Subtracting the liabilities of unsecured creditors with priority ($50,000) gives net free assets of $332,500.

Use the Following Information for Questions Bellow Givingup Company Is

Use the Following Information for Questions Bellow
Givingup Company Is