Question

On january 1, 2017, fishbone corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. fishbone received as consideration a $240,000 non-interest-bearing note due on january 1, 2020. 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, 2017, 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.)

Answer 1

I am quite having trouble with this one too!

Answer 2

Answer: Gain = 21600

Explanation:

The Book Value = cost - accumulated depreciation

The Book Value = 250 000 - 100 000 = 240 000

The Book Value or Carrying Value = $ 240 000

Consideration received is a non interest bearing note of $240 000  to calculate the Gain on the sale of land should be calculated using the Fair Value of the note because there is prevailing market rate of 9% which means there is an active market for the considering therefore we can calculate the Fair Value/Market value of the consideration

The exchange Price for the sale of land = 240000 x 1.09 = 261600

Gain = 261600 - 240000

Gain = 21600