Karen sells vacant land that was held for investment in her business for $277,000. The land had an adjusted basis of $55,400. Thebuyer has offered to pay for the land with $67,000 cash at the date of sale and then in three equal installments of $70,000 over thenext three years beginning on January 1 of the next year. What is Karen's realized and recognized gain in each year of the sale? Assumethat adequate interest is paid in addition to the numbers shown above.Realized gainRecognized gain in year 1Recognized gain in year 2Recognized gain in year 3Recognized gain in year 4$LA$$tALA$221,60013,28070,00070,00070,000

As per standard accounting practices a gain is realised as and when it is earned irrespective…

Answered: Karen sells vacant land that w

Business

Accounting

Karen sells vacant land that w

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Karen sells vacant land that was held for investment in her business for $277,000. The land had an adjusted basis of $55,400. The
buyer has offered to pay for the land with $67,000 cash at the date of sale and then in three equal installments of $70,000 over the
next three years beginning on January 1 of the next year. What is Karen's realized and recognized gain in each year of the sale? Assume
that adequate interest is paid in addition to the numbers shown above.
Realized gain
Recognized gain in year 1
Recognized gain in year 2
Recognized gain in year 3
Recognized gain in year 4
$
LA
$
$
tA
LA
$
221,600
13,280
70,000
70,000
70,000

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