Answer:
B. $165,000
This amount is made up of as follows:
Partially unsecured Liability = $25,000 ($125,000 - 100,000)
plus Unsecured with priority = $20,000
plus Totally Unsecured = $120,000
Total = $165,000
Explanation:
a) The fully secured liability of $40,000 had secured assets worth $50,000, giving excess assets of $10,000.
b) The partially secured liability of $125,000 could only be secured with assets worth $100,000, leaving the balance of $25,000 as unsecured.
c) The Unsecured with priority equals $20,000
d) The completely unsecured without priority equals $120,000.
When (b) to (d) are summed, the total is $165,000.
e) The unsecured liabilities with priority will be paid before other all unsecured liabilities. That is the only advantage they enjoy. But, they can only be settled after all reorganization expenses had been settled.
