1. Read the scenarios below to decide whether or not bankruptcy would be appropriate for the business. Be sure to explain your answer.
a. Sara owns Sara's Sofas, a furniture store in a small city. She has 10 employees who work on a 50
percent commission, and rents the store front for $2,000 per month. All utilities, such as electric and
heat, are included in the monthly rent. Sara's salary is 60 percent of the store's profits. At the end of her
fiscal year, Sara discovered that two of the manufacturers have not been paid for shipments of furniture
to her store. The budget does not include the shipments, and she is unable to pay them. She decides to
declare bankruptcy so the debts will be forgiven. (2 points)