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 is the secured creditor and holds security over Chopin's accounts receivable, which constitutes half of the total assets worth $160,000. Therefore, Frederic Ltd is entitled to receive the amount owed to them, i.e., $200,000. The remaining assets are $80,000, half of which is $40,000. Therefore, Mazurka Inc and Polonaise Inc will receive $60,000 ($40,000 + $20,000) between them. The municipality will not receive anything as there are no funds left after paying the secured and unsecured creditors.

Chopin Inc,a Music Publishing Company,is Bankrupt