Ashitaka Has Declared Bankruptcy and His Trustee Is Currently Dividing

question 60

Multiple Choice

Ashitaka has declared bankruptcy and his trustee is currently dividing his assets.Ashitaka has three creditors.One,a bank,has a general security agreement on a loan for $30 000.The second is his friend,who is owed $1000.The third is the government,owed $5000.Ashitaka has only one asset,his car,with fair market value of $33 000.Which of the following describes how the creditors will be paid?

• A)The bank gets $30 000,the government $3000,and his friend $0.
• B)The bank gets $30 000,the government and his friend get $1500 each.
• C)Each creditor gets $11 000.
• D)The government gets $5000,the bank $28 000,and his friend $0.
• E)The government gets $5000,his friend gets $1000,and the bank gets $27 000.

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Definitions:

Retained Earnings

The accumulated portion of net income that a company decides to keep, rather than distributing among shareholders as dividends, to finance investment or pay off debt.

Common Shares

Equity securities representing ownership interests in a corporation, providing voting rights and entitling shareholders to a share of the company's profits via dividends.

Share Capital

The total amount of funds raised by a company through the issuance of shares to shareholders, representing ownership in the company.

Retained Earnings

The portion of a company's profit that is kept or retained within the company, not distributed to shareholders as dividends.