For many years the Acme Company carried on business as a

manufacturer of consumer products. In $2018,$ it embarked on an

ambitious program of expansion that involved the acquisition of

a new plant and equipment. Financing was carried out by way of

real$-$property mortgages, chattel mortgages, and conditionalsale agreements, with very few internally generated funds being

used for the expansion.

The general decline in demand for its product line as a result

of the poor economic climate placed the company in a serious

financial situation by $2020.$ As a result of a failure to pay a trade

account to one creditor, bankruptcy proceedings were

instituted. Acme did not object to the proceedings and did not

make a proposal to its creditors.

$4$

The trustee disposed of the assets of the company and drew

up a list of creditors entitled to share in the proceeds. His

preliminary calculations were as follows:

Sale of assets

Sale of land and buildings$$350,000$

Sale of production equipment$35,000$

Sale of trucks & automobiles$25,000$

Sale of inventory of finished goods $30,000$

Accounts receivable $45,000$

Cash $ $3,000$ 

$$488,000$

Expenses and Creditor claims

$($all secured claims properly registered$)$

First mortgage on land and buildings $$290,000$

Second mortgage on land and buildings $45,000$

Third mortgage on land and buildings $40,000$

First chattel mortgage on vehicles $22,000$

Second chattel mortgage on vehicles $40,000$

Bank claim under s$.427$ of Bank Act $25,000$

Unsecured trade creditors $60,000$

Unpaid wages $($ten employees at $$300$ each$)3,000$

Unpaid commissions $(1$ at $1,500)1,500$

Bankruptcy expenses, fees, and levy $39,000$

Unpaid municipal taxes $9,000$

Equipment$’$s conditional$-$sale agreement $ $10,000$

$$584,500$

$5$

Calculate the distribution of the funds to the various creditors

and calculate the cents$-$per$-$dollar amount that the unsecured

trade creditors would receive.

Answer rating: 100% (QA)

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