April 30, White sold land with a book value of $600,000 to Black for its fair value of $800,000. Black gave White a 12 percent, $800,000 note secured only by the land. At the date of sale, Black was in a very poor financial position and its continuation
April 30, White sold land with a book value of $600,000 to Black for its fair value of $800,000. Black gave White a 12 percent, $800,000 note secured only by the land. At the date of sale, Black was in a very poor financial position and its continuation
Chapter13: Property Transact Ions: Determination Of Gain Or Loss, Basis Considerations, And Nontaxable Exchanges
Section: Chapter Questions
Problem 13DQ
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On April 30, White sold land with a book value of $600,000 to Black for its fair value of $800,000. Black gave White a 12 percent, $800,000 note secured only by the land. At the date of sale, Black was in a very poor financial position and its continuation as a going concern was very questionable. white should......
a. Use the cost recovery method of accounting
b. Record the note at its discounted value
c. Record a $200,000 gain on the sale of the land
d. Increase the allowance for uncollectibles for the full amount of the note
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