Fact Pattern 30-1B In January,Jazz Dance Studio Owes Kay,its Musical Director,$1,800 for Cur?rent

question 18

Multiple Choice

Fact Pattern 30-1B
In January,Jazz Dance Studio owes Kay,its musical director,$1,800 for cur?rent wages,receives $700 as a down payment for dance lessons from Lora,and pays a Music,Inc. ,a sheet music supplier,$1,500 of $3,000 owed.In February,the studio files a petition in bankruptcy for relief through a liquidation.
-Refer to Fact Pattern 30-1B.Based on the size of the studio's estate in bank?ruptcy,each of Jazz's creditors will get only 10 percent of their claims.Regarding the payment to Music,Inc. ,the trustee may

• A)not recover it because Music's claim has priority.
• B)not recover it unless Music is an in?sider.
• C)recover it as a fraudulent transfer.
• D)recover it as a voidable preference.

---

Definitions:

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business over a specific period, typically including income statement, balance sheet, and cash flow statement.

Stockholders' Equity Account

A financial statement that shows the ownership value held by the shareholders of a company, consisting of share capital plus retained earnings and less any treasury shares.

Extra Dividends

Dividends paid in addition to the expected regular dividends during a fiscal year, often signaling strong company performance.