Johnson joined other creditors of Alpha Company in a composition agreement seeking to avoid the necessity of a bankruptcy proceeding against Alpha. Which statement describes the composition agreement?

It provides for the appointment of a receiver to take over and operate the debtors business.

It provides that the creditors will receive less than the full amount of their claims.

It must be approved by all creditors.

It provides a temporary delay, not to exceed six months, insofar as the debtors obligation to repay thedebts included in the composition is concerned.

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Freeman Company ceased doing business and is in bankruptcy. Among the claimants are employees seeking unpaid wages. The following statements describe the possible status of such claims in a bankruptcy proceeding or legal limitations placed upon them. Which one is an incorrect statement?

Such claims include wages earned within 180 days before the filing of the bankruptcy petition, but not to exceed $4,650 in amount.

If a priority is afforded such claims, it cannot exceed $4,650 per wage earner.

The amounts of excess wages not entitled to a priority are mere unsecured claims.

Such claims are entitled to priority.

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Which of the entities listed is not subject to an involuntary bankruptcy petition?

A municipality.

A partnership.

A retailing corporation.

A wholesaler company.

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The highest priority for payment of unsecured claims in a bankruptcy proceeding is:

Wages owed to an insolvent employee.

Wages up to $4,650 earned within three months before the petition.

Unpaid federal income taxes.

Administrative expenses of the bankruptcy.

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Which of the following situations that arise because of a debtors financial difficulties and would not otherwise be acceptable to the creditor must be accounted for as a troubled debt restructuring?

Because of a court order, a creditor reduces the stated interest rate for the remaining original life of the debt.

Because of a court order, a creditor accepts as full satisfaction of its receivable a building the fair value of which equals the creditors recorded investment in the receivable.

As part of a negotiated settlement, a creditor accepts as full satisfaction of its receivable a building the fair value of which equals the debtors carrying amount of the payable.

As part of a negotiated settlement designed to maintain a relationship with a debtor, a creditor reducesthe effective interest rate on debt outstanding to reflect the lower market interest rate currently applicableto debt of that risk class.