Since Hongyan MechanicalEngineeringCo Ltd (HongyanCo) could not settle the huge amount of debts due, its creditors applied for bankruptcy in the competent people’s court. The court accepted the application of the creditors and declared the bankruptcy of HongyanCo. The court designated a bankruptcy administrator to be in charge of the bankruptcy liquidation.During the process of bankruptcy liquidation, the bankruptcy administrator formulated a list of bankruptcy assets, debts due and declared credits.(a) the appraised bankruptcy assets of HongyanCo were as follows:(i) Office building – appraised value of RMB、2,400,000 yuan, mortgaged for a loan borrowed from theCommunicationBank.(ii) Investment to a mutual fund – RMB、1,400,000 yuan.(iii)
A、rental receivable fromCompany A、– RMB、1,900,000 yuan.(iv) Giving up a creditor’s right due 10 months before the bankruptcy of HongyanCo – RMB、1,000,000 yuan.(b) the declared credits by HongyanCo’s creditors were as follows:(i)CommunicationBank’s loan – principal RMB、2,000,000 yuan with 10% of annual interest rate for two years.(ii)CompanyA’s credit due – RMB、7,000,000 yuan.(iii)CompanyB’s credit under a sales contract payable by HongyanCo – RMB、1,500,000 yuan.(iv)CompanyC’s damages due to the termination of contract by the bankruptcy administrator – RMB、1,400,000 yuan.Required:Answer the following questions in accordance with the relevant provisions of theEnterpriseBankruptcy Law ofChina and give your reasons for your answer: (b) state the particular debt of HongyanCo that could be off-set from its bankruptcy assets; (2 marks)