Tangent 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 Tangent 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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Arrow will first receive the liquidation value of the collateral, which is $30,000. The remaining unsecured portion of the note is $60,000 ($90,000 - $30,000), and Arrow will receive 30% of this amount, which is $18,000. Therefore, the total amount realized by Arrow is $30,000 + $18,000 = $48,000.

Tangent Corporation Was Forced into Bankruptcy and Is in the Process