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Question(s) / Instruction(s):

In a bankruptcy, which of the following statements is true?

a)            Secured notes payable are considered liabilities with priority on a statement of affairs.

b)            An order for relief results only from a voluntary petition.

c)            A liquidation is referred to as a Chapter 7 bankruptcy, and a reorganization is referred to as a Chapter 11 bankruptcy.

d)            Creditors entering an involuntary petition must have debts totaling at least $20,000.


 

2              In reporting a company that is to be liquidated, assets are shown at

a)            Book value.

b)            Historical cost.

c)            Net realizable value.

d)            Present value calculated using an appropriate effective rate.


 

3              What is a debtor in possession?

a)            The holder of a note receivable issued by an insolvent company prior to the granting of an order for relief.

b)            The ownership of an insolvent company that continues to control the organization during a bankruptcy reorganization.

c)            A fully secured creditor.

d)            The stockholders in a Chapter 7 bankruptcy.


 

4              Prior to filing a voluntary Chapter 7 bankruptcy petition, Haynes Company pays a supplier $13,000 to satisfy an unsecured claim. Haynes was insolvent at the time. Subsequently, the trustee appointed to oversee this liquidation forces the return of this $13,000. Which of the following is correct?

a)            A preference transfer has been voided.

b)            The supplier should sue for the return of this money.

c)            All transactions just prior to a voluntary bankruptcy proceeding must be nullified.

d)            The $13,000 claim becomes a liability with priority.


 

 

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