Rights of Creditors and Shareholders Discussion

Question Description

Pat Simpson created the PS corporation, called PS, Inc., naming himself as CEO and the singular director. His intent was to build mobile college classrooms, classrooms that were double-wide mobile homes and fully equipped with desks, white boards, and enough electrical outlets for instructional tools, including computers. Each classroom cost $100,000 to build, and PS planned to build 10 classrooms within its first four months of operations. Pat put $10,000 of his money into the corporation. Pat was able to sell 1,000 shares in the corporation at $10 each. The production of the mobile classrooms was slow. Pat purchased a new Mercedes with the corporate funds, paid his monthly mortgage costs, and remodeled his game room. PS was left with $12,500 in cash and no classrooms, but debts of $65,000 owed to contractors who were working on the first classroom. Discuss the rights of creditors and shareholders in this situation.

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