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A corporation that is unable to pay its debts as they become due is: bankrupt. overdrawn. insolvent. liquidating. 2.When a business becomes insolvent, it generally has three possible courses of actio

A corporation that is unable to pay its debts as they become due is:

  1. bankrupt.
  2. overdrawn.
  3. insolvent.
  4. liquidating.

 

2.When a business becomes insolvent, it generally has three possible courses of action.  Which of the following is not one of the three possible courses of action?

  1. the debtor and its creditors may enter into a contractual agreement, outside of formal bankruptcy proceedings.
  2. the debtor continues operating the business in the normal course of the day to day operations.
  3. the debtor or its creditors may file a bankruptcy petition, after which the debtor is liquidated under Chapter 7.
  4. the debtor or its creditors may file a petition for reorganization under Chapter 11.

 

3.Assets transferred by the debtor to a creditor to settle a debt are transferred at:

  1. book value of the debt.
  2. book value of the transferred assets.
  3. fair market value of the debt.
  4. fair market value of the transferred assets.

 

4.A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to:

  1. accept less than the full amount of their claims.
  2. delay settlement of the claim until a latter date.
  3. force the debtor into a liquidation.
  4. accrue interest at a higher rate.

 

5.In a troubled debt restructuring involving a modification of terms, the debtor’s gain on restructuring:

  1. will equal the creditor’s gain on restructuring.
  2. will equal the creditor’s loss on restructuring.
  3. may not equal the creditor’s gain on restructuring.
  4. may not equal the creditor’s loss on restructuring.

 

6.A bankruptcy petition filed by a firm is a:

  1. chapter petition.
  2. involuntary petition.
  3. voluntary petition.
  4. chapter 11 petition.

 

7.When a bankruptcy court enters an “order for relief”, it has:

  1.     accepted the petition.
  2.    dismissed the petition.
  3.     appointed a trustee.
  4.    started legal action against the debtor by its creditors.

 

8.An inventory petition filed by a firm’s creditors whereby there are 12 or more creditors must be signed by at least:

  1.     two creditors.
  2.    three creditors.
  3.     five creditors.
  4.    six creditors.

 

9.The duties of the trustee include:

  1.     appointing creditors’ committees in liquidation cases.
  2.    approving all payments for debts incurred before the bankruptcy filing.
  3.     examining claims and disallowing any that are improper.
  4.    calling a meeting of the debtor’s creditors.

 

10.Which of the following items is not a specified priority for unsecured creditors in a bankruptcy petition?

  1.     Administration fees incurred in administering the bankrupt’s estate.
  2.    Unsecured claims for wages earned within 90 days and are less than $4,650 per employee
  3.     Unsecured claims of government entities for unpaid taxes.
  4.    Unsecured claims on credit card charges that doesn’t exceed $3,000.

Mar 29 2020 View more View Less

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