Heriot Manufacturing Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $2 million in outstanding debts and approximately $1.2 million in marketable short-term assets.

Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan.

a. Each creditor will be paid 60 cents on the dollar immediately, and the debts will be considered fully satisfied.

b. Each creditor will be paid 80 cents on the dollar in two quarterly installments of 50 cents and 30 cents. The first installment is to be paid in ninety days.

c. A group of creditors with claims of $600,000 will be immediately paid in full; the rest will be paid 85 cents on the dollar, payable in ninety days.