This Year,John Purchased Property from William by Assuming an Existing $$\begin{array} { | l | l | } \hline \text { Sales Price } & \text { Contract Price } \\\hline \$ 40,000 & \$ 60,000 \\\hline\end{array}$$

question 8

Multiple Choice

This year,John purchased property from William by assuming an existing mortgage of $40,000 and agreed to pay an additional $60,000,plus interest,in the 3 years following the year of sale (i.e.,$20,000 annual payments for three years,plus interest) .William had an adjusted basis of $44,000 in the building.What are the sales price and the contract price in this transaction?

• A) \[\begin{array} { | l | l | }
• \hline \text { Sales Price } & \text { Contract Price } \\
• \hline \$ 40,000 & \$ 60,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | }
• \hline \text { Sales Price } & \text { Contract Price } \\
• \hline \$ 100,000 & \$ 40,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | }
• \hline \text { Sales Price } & \text { Contract Price } \\
• \hline \$ 100,000 & \$ 60,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | l | }
• \hline \text { Sales Price } & \text { Contract Price } \\
• \hline \$ 100,000 & \$ 100,000 \\
• \hline
• \end{array}\]

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Definitions:

Payables

Short for accounts payable; money owed by a company to its suppliers or creditors for products and services received but not yet paid for.

Fixed Asset Turnover Rate

A financial ratio that measures how effectively a company is using its fixed assets to generate sales.

Total Asset

The sum of a company's current and non-current assets, representing the company’s total owned resources.

Annual Sales

The total revenue a company generates from its operations over a one-year period.