Kyle sold land on the installment basis for $100,000. His basis in the land was $70,000....
Kyle sold land on the installment basis for $100,000. His basis in the land was $70,000. Kyle received a $40,000 down payment and a real estate installment sale contract calling for $60,000 in additional payments in future years. In addition, Kyle paid $6,000 in commissions on the sale. What is the gross profit to be recognized in the current year?
Group of answer choices
$24,000
$12,000
$9,600
$0
Homework Answers
Solution
The option 'C, $9600' is correct option.
Explanation:
| Sold of land | $100,000 |
| Basis of land | $(70,000) |
| Commission | $(6000) |
| Gross profit | $24,000 |
| Contract price | $100,000 |
| Profit percentage | 24% ($24,000/$100,000) |
| Cash collected | $9,600 ($40,000 × 24%) |
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