Dobby 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. Carson holds a note receivable from Dobby for $75,000 collateralized by an asset with a book value of $50,000 and a liquidation value of $25,000. The amount to be realized by Carson on this note is:

Question

Quizplus · Accepted Answer

Carson will first receive the liquidation value of the collateral, which is $25,000. The remaining unsecured portion of the note is $50,000 ($75,000 - $25,000), and Carson will receive 30% of this amount, which is $15,000. Therefore, the total amount realized by Carson is $25,000 + $15,000 = $40,000.

Dobby Corporation Was Forced into Bankruptcy and Is in the Process