Xavier Company is going through a Chapter 7 bankruptcy. All assets have been liquidated, and the company retains only $25,700 in free cash. The following debts, totaling $40,550, remain:

Government claims to unpaid taxes $ 6,500

Salary during last month owed to Mr. Key (not an officer) 18,325

Administrative expenses 2,950

Salary during last month owed to Ms. Rankin (not an officer) 5,725

Unsecured accounts payable 7,050

Solution:

First administrative expenses would be paid out

Administrative expenses $2,950

Then all salaries would be paid to a maximum limit of $10,950 per person

Hence Mr. Key will get $10,950

Ms. Rankin will get $5,725

Then unsecured account payable would be discharged: $6075 (Only this is left)

**** I have the solution I just do not understand where the maximum salaries paid ($10,950) is coming from/how to get it please advise Thank you!