On November 15, 2016, LaGrow Developers Sold a Parcel of Land

question 53

Multiple Choice

On November 15, 2016, LaGrow Developers sold a parcel of land for $4,000,000. They had originally paid $3,000,000 for the land. The terms of the sale called for a $2,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assuming that LaGrow uses the installment sales method, in its December 31, 2016 balance sheet, the company would report ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

• A) $1,500,000 net installment account receivable
• B) $1,000,000 net installment account receivable
• C) $4,000,000 net installment account receivable
• D) $2,000,000 net installment account receivable

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Definitions:

Presentment

The act of formally presenting a document, such as a check or bill of exchange, for acceptance or payment.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Fraud in the Inducement

A deceptive practice intended to mislead someone into entering a contract or agreement by providing false statements or misleading information.

Warranty Liability

The legal obligation of a seller to provide compensation for faults in goods or property that were sold under warranty.