Which of the Following Is True About Bankruptcy

question 47

Multiple Choice

Which of the following is true about bankruptcy?

• A) When one or more creditors file the bankruptcy petition against the debtor, it's called ordinary bankruptcy.
• B) Chapter 11 of the Bankruptcy Reform Act of 1978 contains a provision for reorganizing the bankrupt business only when the bankruptcy petition is filed voluntarily.
• C) Involuntary bankruptcy occurs when a debtor files an application with a court claiming that debts exceed assets and asks to be declared bankrupt.
• D) Under bankruptcy law, people or businesses can petition the courts to be relieved of the obligation to pay debts they cannot repay.

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Definitions:

Current Asset

Assets expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of a business, whichever is longer.

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operations is used, as opposed to the indirect method which adjusts net income for accruals.

Accrued Interest

Interest that has been incurred but not yet paid or received at the end of the accounting period.

Maturity Date

The specified date on which the principal amount of a loan, bond, or other financial instrument is due to be paid in full.