Distributions in a business liquidation
Assume that Kennedy Company acquires $1,600 cash from creditors and $1,800 cash from creditors and $1,800 cash from investors.
Required
a. Explain the primary differences between investors and creditors.
b. If Kennedy has a net loss of $1,600 cash and then liquidates, what amount of cash will the creditors receive? What amount of cash will the investors receive?
c. If Kennedy has net income of $1,600 and then liquidates, what amount of cash will the creditors receive? What amount of cash will the investors receive?
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