Question

On January 1, 2020, Cullumber Corporation sold a building that cost $251,060 and that had accumulated depreciation of $109,510 on the date of sale. Cullumber received as consideration a $241,060 non-interest-bearing note due on January 1, 2023. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2020, was 9%. At what amount should the gain from the sale of the building be reported? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

What is the amount of gain should be reported $

Answer 1

Answer:
Period of Note = 3 Years
Particulars	Amount (in $ )
Sale value	$ 251,060
Less: Accumulated depreciation	($ 109,510)
Book value of Building	$ 141,550
Particulars	Amount (in $ )
Present Value of note received          = $ 241,060 x PVF (9%, 3 Years )          =   $ 241,060 x 0.77218	$ 186,141.71
Less: Book value of Building	($ 141,550 )
Amount of gain should be reported	$ 44,592