Chopin Inc, a music publishing company, is bankrupt.It has four creditors.One of the creditors, Frederic Ltd, is owed $200 000, and holds security over Chopin's accounts receivable.None of the other claims is secured.The municipal government is owed $100 000 in unpaid taxes.Mazurka Inc is owed $60 000 and Polonaise Inc is owed $40 000.Chopin has assets worth a total of $160 000.Half of that amount consists of its account receivables.The remainder consists of various assets that have been sold to produce a fund of money.Which of the following statements is TRUE?

Question

Quizplus · Accepted Answer

Frederic Ltd holds security over Chopin's accounts receivable, which amounts to half of Chopin's total assets ($160,000/2 = $80,000). Since Frederic's claim is secured, they are entitled to the full amount of the accounts receivable before any other creditors are paid from the remaining assets.

Chopin Inc, a Music Publishing Company, Is Bankrupt