In a Chapter 7 liquidation, the situation for a firm after the payment of bankruptcy fees, secured bond payments and wages and taxes is as follows.

Remaining proceeds ($)

Net after bankruptcy fees, secured

bond payment, and wages and taxes 10,000,000

Remaining Claims ($)

Accounts payable 6,000,000

Notes payable 4,000,000

Secured bond as general claim 5,000,000

Debenture 15,000,000

Subordinated debenture 5,000,000

Total $35,000,000

In the final settlement of the remaining claims, what is the amount that the Debentures will receive?

	a.	zero
	b.	$1,428,500
	c.	$4,285,500
	d.	$5,714,000

In a Chapter 7 liquidation, the property used as collateral for a $2,000,000 bond is sold (liquidated) for $1,500,000, and this amount is paid to the bondholder. What happens to the $500,000 still owed to the bondholder?

	a.	it is not permitted for the property to be sold for less than what is owed, that is for less than $2,000,000
	b.	the bondholder completely loses this $500,000
	c.	the entire $2,000,000 is settled as a general (uncollateralized) creditor claim when the property cannot be sold for $2,000,000
	d.	the bondholder settles the $500,000 as a general (uncollateralized) creditor claim

A firms Total Fixed Assets this year equals $5,000,000 and last year equals $3,000,000. Its Working Capital this year equals $1,500,000 and last year equals $1,000,000. Its depreciation this year - assumed to be a capital expenditure - equals $1,000,000. This firms Capital Spending equals:

	a.	$3,000,000
	b.	$3,500,000
	c.	$2,000,000
	d.	$5,000,000