DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. Th

Q: DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. Th

Statement showing amount recovered by Magma (Amount in $) Secured Mortgage Receivable (Fair value of Land and Building) 190,000 Balance Amount treated as unsecured (200,000-190,000)*0.18 1,800 Interest on mortgage receivable secured by mortgage note 4,000 Unsecured Note receivable ($80,000*0.18) 14,400 Interest on Unsecured note receivable ($2,000*0.18) 360 Total Recovery 210,560

ID: 2577176 • Letter: D

Question

DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.18 on the dollar. Magma Corporation holds a $200,000 mortgage receivable from DeFunk that is secured by the land and buildings with a book value of $180,000 and a fair value of $190,000. Magma also holds an $80,000 unsecured note receivable from Defunk. Mortgage interest owed, which is secured with the mortgage note, is $4,000. Note interest owed, which is unsecured, is $2,000.

Required: How much of the amounts owed will Magma recover?

Explanation / Answer

Statement showing amount recovered by Magma (Amount in $)

Secured Mortgage Receivable (Fair value of Land and Building) 190,000 Balance Amount treated as unsecured (200,000-190,000)*0.18 1,800 Interest on mortgage receivable secured by mortgage note 4,000 Unsecured Note receivable ($80,000*0.18) 14,400 Interest on Unsecured note receivable ($2,000*0.18) 360 Total Recovery 210,560

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DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. Th

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