Question

Adams acquired Blackacre for $50,000 cash plus a purchase money mortgage of $200,000. Over the next couple of years Adams claimed $100,000 of depreciation (cost recovery deduction) on Blackacre. In addition over the same period of time he paid off $80,000 of the purchase money mortgage. At a time when Blackacre had a FMV of $400,000, Adams sold Blackacre to Sally, who assumed the existing debt, gave Adams her personal note in the amount of $100,000 and a check for the balance.

(a) Make the journal entry to record Adams’ sale of Blackacre to Sally.

Answer 1

Account	Debit	Credit
Note receivable	100,000
Money mortgage payable	120,000
Accumulated depreciation	100,000
Blackacre		250,000
Gain on sale of blackacre		70,000