Moddle Corporation Is Being Liquidated Under Chapter 7 of the Bankruptcy

question 22

Essay

Moddle Corporation is being liquidated under Chapter 7 of the Bankruptcy Act.The trustee has determined that the unsecured claims will receive $.20 on the dollar.National Corporation holds a $500,000 mortgage note receivable from Moddle that is secured by equipment with a $550,000 book value and a $430,000 fair value.
Required:
How much of the mortgage receivable will National recover?

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Definitions:

Straight-Line Method

A method of allocating an asset's cost evenly over its useful life, commonly used in depreciation and amortization calculations.

Residual Value

The estimated value that an asset will have at the end of its useful life.

Depreciation Expense

An accounting method to allocate the cost of a tangible asset over its useful life.

Residual Value

The estimated salvage value of an asset at the end of its useful life.