Pasten Corporation Is Liquidating Under Chapter 7 of the Bankruptcy

question 7

Essay

Pasten Corporation is liquidating under Chapter 7 of the Bankruptcy Act.The accounts of Pasten at the time of filing are summarized as follows:
The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage.Wages and salaries were earned within 90 days of filing the bankruptcy petition and do not exceed $10,000 per employee.Liquidation expenses are expected to be $35,000.
Required:
1.Prepare a schedule showing the priority rankings of the creditors and the expected payouts.
2.Yuomi Corporation was a supplier to Pasten Corporation and at the time of Pasten's bankruptcy filing, Yuomi's account receivable from Pasten was $500,000.On the basis of the estimates, how much can Yuomi expect to receive?

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Definitions:

Corporation

A legal entity separate from its shareholders, with its own rights, privileges, and liabilities.

Business Entity

An organization established as a separate legal entity for business purposes, which may include corporations, partnerships, and sole proprietorships.

Accounting Purposes

The reason or rationale for recording financial transactions and maintaining financial records, mostly to provide insight into a business’s financial health, comply with legal obligations, and inform decision-making.

Proprietorship

A business entity owned and operated by a single individual, with no legal distinction between the owner and the business.