rim Inc., which owes Habib Co. SAR 900,000 in notes payable, is in financial difficulty. To eliminate the debt, Habib agrees to accept from Karim land having a fair value of SAR 610,000 and a recorded cost of SAR 450,000. a) Compute the amount of gain or loss to Karim, Inc. on the transfer (disposition) of the land. b) Compute the amount of gain or loss to Karim, Inc. on the settlement of the debt. c) Prepare the journal entry on Karim's books to record the settlement of this de

rim Inc., which owes Habib Co. SAR 900,000 in notes payable, is in financial difficulty. To eliminate the debt, Habib agrees to accept from Karim land having a fair value of SAR 610,000 and a recorded cost of SAR 450,000. a) Compute the amount of gain or loss to Karim, Inc. on the transfer (disposition) of the land. b) Compute the amount of gain or loss to Karim, Inc. on the settlement of the debt. c) Prepare the journal entry on Karim's books to record the settlement of this de

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter12: Nonrecognition Transactions

Section: Chapter Questions

Problem 22P

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Quito, Inc., which owes Ecuador Company $1.200.000 in notes payabie. is in inuncial dilficulty To eliminate the debt. Ecuador agrees to accept from Quino land having a fair markat value of $810,000 and a recorded cost of S620,000. Using the attached form, compute the amount of gain or loss to Quite. Inc. on the transfer (disposition) of the land. Using the attached form, compute the amount of gain or hess to Quits, Inc. on the settlement of the debt. Using the attached form, prepare the jeurnal enry on Quito's books o recond the settlement of this debt. Omit explanation. Using the attached form, compute the gain or loss to Ecuader Company brom settlement of its receivable from Quito Using the attached form, prepare the journal entry on Ecusdor's books tn record the settlement of this receivable. Omit explanation REQUIRED: (1) (2) (3) (4) (5)
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Mr..Park loaned P24,000,000 to Jay & Won Company. The loan is secured by land situated in North Carolina, U.S.A. with a book value and fair value of P30,000,000 and P18,000,000, respectively. Due to the current financial conditions, Jay & Won Company was forced to liquidate. What amount will the Mr. Park receive if unsecured creditors receive 30% of their claims?
Dial Co. and Safeguard Inc. engage in an exchange of nonmonetary assets that LACKS commercial substance. Dial gives up an asset with a book value of $20,000 and a fair market value of $19,000. Safeguard gives up an asset with a book value of $12,000 and a fair market value of $15,000. Safeguard also paid $4,000 cash boot. What amount should SAFEGUARD record for the asset received and for the gain or loss? O $16,000 and $3,000 gain O $16,000 and $0 gain/loss O $15,000 and $0 gain/loss O $19,000 and $3,000 gain
Firm R owned depreciable real property subject to a $300,000 nonrecoursemortgage. The property’s FMV is only $250,000. Consequently, the firm surrenderedthe property to the creditor rather than continuing to service the mortgage. At date ofsurrender, Firm R’s adjusted basis in the property was $195,000.Required:Determine Firm R’s cash flow consequences of the disposition, assuming that the gainrecognized is taxed at 21 percent.
Before any debt cancellation, PeppersCo holds business land with a $2,400,000 fair market value, a $1,000,000 tax basis, and a related mortgage of $3,000,000. The lender reduces the mortgage principal by $600,000. What are the Federal income tax consequences of the debt cancellation given the following independent scenarios? A, Peppers is insolvent, and the land and related mortgage are the only asset and debt, respectively. B. the mortgage is seller financing, and Peppers is solvent. C. Peppers has filed for bankruptcy and the debt is discharged by that action.
Ayayai Automotive is looking to expand its operations and has approached Dynatech Garage to acquire its business. Dynatech has agreed to sell if Ayayai assumes the mortgage on Dynatech's building as part of the sale. The fair value of Dynatech's identifiable assets and identifiable liabilities are: Inventory: 149000. Buildings: 949000. Land: 349000. Mortage payable (274000). Net identifiable assets: 1,173,000. Assuming Ayayai purchases the business for $Record the journal entry for the purchase by Ayayai Automotive. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles Debit Credit 1,324,000
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