On December 31, 2018, Note Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Note equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Note should recognize a gain or loss on the transfer
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On December 31, 2018, Note Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Note equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and
A.) $0
B.) $200,000 gain
C.) $300,000 gain
D.) $950,000 loss
A recognized gain is when an investment or asset is sold for an amount that is greater than what was originally paid. Recognizing gains on an asset will trigger a capital gains situation, but only if the asset is deemed to be capital in nature.
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