Target Corporation was forced into bankruptcy and is in the process of liquidating assets and paying claims.Unsecured claims will be paid at the rate of thirty cents on the dollar.Arrow holds a note receivable from Target for $90,000 collateralized by an asset with a book value of $60,000 and a liquidation value of $30,000.The amount to be realized by Arrow on this note is:

Question

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Since Target is paying unsecured claims at a rate of thirty cents on the dollar, Arrow can expect to receive $27,000 (30% of the $90,000 note receivable). However, since the collateral's liquidation value is only $30,000, Arrow will not receive any more than this amount. Therefore, the amount to be realized by Arrow on the note is $30,000 (the liquidation value of the collateral) plus $18,000 (30% of the remaining $60,000 balance on the note) for a total of $48,000.

Target Corporation Was Forced into Bankruptcy and Is in the Process