Ray's New Higher Arithmetic · Art. 359 · Unit 23: Partnership
104. Bankruptcy
Goal: Your student finds how much a bankrupt can pay on the dollar and what each creditor receives.
You'll need
- The book
- A slate, small whiteboard or scrap paper
- A notebook and pencil
What's in the book
Bankruptcy: definitions, the assignee, remarks on expenses and paying "so much on the dollar," a note on the law, a worked example and practice, and the topical outline of the chapter. Answers are printed.
The lesson, step by step
Warm-up
Ask: If someone owes $100 but has only $60, and owes it to three people, how should the $60 be shared?
The idea
Read:
Bankruptcy is the inability of a person or a firm to pay indebtedness.
The assets of a bankrupt are usually placed in the hands of an Assignee, whose duty it is to convert them into cash, and divide the net proceeds among the creditors in proportion to their claims.
Work the book's example
A has a lot worth $8000, good notes $2500, and cash $1500; his debts are $20000: what can he pay on $1, and what will A receive, whose claim is $4500?
Property $12000 ÷ debts $20000 = .60, so 60 cents on the dollar. The creditor with $4500 gets $2700.
Guided practice
My assets are $2520; I owe A $1200; B, $720; C, $600; D, $1080: what does each get, and what is paid on each dollar?
Expenses first
Read the remark that the assignee's fee and other expenses come out before dividing. Then try:
A bankrupt's estate is worth $16000; his debts, $47500; the assignee charges 5%: what is paid on $1, and what does A get, whose claim is $3650?
Review and wrap-up
Check the printed answers. Then look at the topical outline of Partnership and Bankruptcy and let your student explain each line.