Question

QUESTION 23

1. On January 1, 2017 Company A sold an old building with a basis of $250,000 to Company B in exchange for a $700,000 note receivable. The note Company B issued to Company A had a coupon rate of 5%, pays interest annually and is due on December 31, 2020. Company B’s cost of capital or market rate of interest is 4%.
   
   As of January 1, 2017, what was sale price (fair market value/present value) Company B paid Company A for the old building? Round to the nearest dollar.

10 points   

QUESTION 24

1. On January 1, 2017 Company A sold an old building with a basis of $250,000 to Company B in exchange for a $700,000 note receivable. The note Company B issued to Company A had a coupon rate of 5%, pays interest annually and is due on December 31, 2020. Company B’s cost of capital or market rate of interest is 4%.
   
   
   What was the amount of Company A’s gain or (loss) on the sale of the old building on January 1, 2017 (round to the nearest dollar)?

Answer 1

Solution: