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Homework answers / question archive / Fabulous Fakes Corporation is being liquidated under Chapter 7 of the bankruptcy act
Fabulous Fakes Corporation is being liquidated under Chapter 7 of the bankruptcy act. All assets have been converted into cash, and $374,500 cash is available to pay the following claims:
1. | Administrative expenses of preserving and liquidating the debtor corporation’s estate | $12,500 |
2. | Merchandise creditors | 99,000 |
3. | Local government for property taxes | 4,000 |
4. | Local bank for unsecured loan (principal is $30,000 and interest is $4,500) | 34,500 |
5. | State government for gross receipts taxes | 3,000 |
6. | Employees for unpaid wages during the month before filing (includes $12,275 for the company president and less than $11,725 for each of the other employees) | 48,000 |
7. | Customers for prepaid merchandise that was not delivered | 1,500 |
8. | Holders of the first mortgage on the company’s real estate that was sold for $240,000 (includes $220,000 principal and $8,500 interest) | 228,500 |
Assume that all the claims are allowed and that they were timely filed.
Required
Rank the claims according to priority under the bankruptcy act.