1. What are the objectives of the bankruptcy laws in the United States?
a. Provide relief for the court system and ensure that all debtors are treated the same.
b. Distribute assets fairly and discharge honest debtors from their obligations.
c. Protect the economy and stimulate growth.
d. Prevent insolvency and protect shareholders.

2. In a bankruptcy, which of the following statements is true?
a. An order for relief results only from a voluntary petition.
b. Creditors entering an involuntary petition must have debts totaling at least $20,000.
c. Secured notes payable are considered liabilities with priority on a statement of affairs.
d. A liquidation is referred to as a Chapter 7 bankruptcy, and a reorganization is referred to as a Chapter 11 bankruptcy.

3. In reporting a company that is to be liquidated, assets are shown at
a. Present value calculated using an appropriate effective rate.
b. Net realizable value.
c. Historical cost.
d. Book value.

4. An involuntary bankruptcy petition must be filed by
a. The insolvent company’s attorney.
b. The holders of the insolvent company’s debenture bonds.
c. Unsecured creditors with total debts of at least $13,475.
d. The company’s management.

5. An order for relief
a. Prohibits creditors from taking action to collect from an insolvent company without court approval.
b. Calls for the immediate distribution of free assets to unsecured creditors.
c. Can be entered only in an involuntary bankruptcy proceeding.
d. Gives an insolvent company time to file a voluntary bankruptcy petition.

6. Which of the following is not a liability that has priority in a liquidation?
a. Administrative expenses incurred in the liquidation.
b. Salary payable of $800 per person owed to 26 employees.
c. Payroll taxes due to the federal government.
d. Advertising expense incurred before the company became insolvent.

7. Which of the following is the minimum limitation necessary for filing an involuntary bankruptcy petition?
a. The signature of 12 creditors to whom the debtor owes at least $10,000 in unsecured debt.
b. The signature of six creditors to whom the debtor owes at least $20,000 in unsecured debt.
c. The signature of three creditors to whom the debtor owes at least $13,475 in unsecured debt.
d. The signature of nine creditors to whom the debtor owes at least $25,000 in unsecured debt.

8. On a statement of financial affairs, how are liabilities classified?
a. Current and noncurrent.
b. Secured and unsecured.
c. Monetary and nonmonetary.
d. Historic and futuristic.

9. What is a debtor in possession?
a. The holder of a note receivable issued by an insolvent company prior to the granting of an order for relief.
b. A fully secured creditor.
c. The ownership of an insolvent company that continues to control the organization during a bankruptcy reorganization.
d. The stockholders in a Chapter 7 bankruptcy.

10. How are anticipated administrative expenses reported on a statement of financial affairs?
a. As a footnote until actually incurred.
b. As a liability with priority.
c. As a partially secured liability.
d. As an unsecured liability.