Series 79: Chapter 14 Practice Question Answers

Chapter 14 Practice Question Answers

1. 1. Answer: D. Administrative expenses of the bankruptcy are paid before other unsecured creditors collect. Next in line are unpaid wages due workers. These claims are considered priority unsecured claims (along with unpaid employee benefit contributions, customer deposits, and taxes due, other than those subject to a tax lien). Claims of trade suppliers are an example of general unsecured claims, which are lower in priority than priority unsecured claims. Shareholders are paid last, although preferred shareholders are paid before common shareholders.
2. 2. Answer: D. This is referred to as debtor-in-possession (DIP) financing because the company remains “in possession” of the company’s assets. Section 363