Question

Knox operates an electronics store as sole proprietor. On April 5, Knox was involuntarily petitioned into bankruptcy under the liquidation provisions of the Bankruptcy Code. On April 20, a trustee in bankruptcy was appointed and an order for relief was entered. Knox's nonexempt property has been converted to cash, which is available to satisfy the following claims and expenses as may be appropriate:

Claims and Expenses

Claim by Dart Corp. (one of Knox's suppliers) for computers ordered on April 5, and delivered on credit to Knox on April 10. $20,000

Fee earned by the bankruptcy trustee. $ 15,000

Claim by Boyd for deposit given to Knox on April I, for computer Boyd purchased for personal use but that had not yet been received by Boyd. $ 1,500

Claim by Noll Co. for the delivery of stereos to Knox on credit. The stereos were delivered on April 4, and a financing statement was properly filed on April 5. These stereos were sold by the trustee with Noll's consent for $7,500, their fair market value. $ 5,000

Fees earned by the attorneys for the bankruptcy estate. $ 10,000

Claims by unsecured general creditors $ 1,000 The cash available for distribution includes the proceeds from the sale of the stereos.

What amount will be distributed to Boyd if the cash available for distribution is $50,800?

Answer 1

$800

Step-by-step explanation:

Since $50,800 are available for distribution, the payments will start with the trustee, the lawyers and the suppliers:

• trustee will receive $15,000
• lawyers will receive $10,000
• Dart will receive $20,000
• Noll will receive $5,000

• total $50,000

After the suppliers, lawyers and trustee are paid, only $800 are left and they will be given to Boyd. The creditors with unsecured claims will get $0.