Louis Sold His Farm During the Current Taxable Year

question 20

Essay

Louis sold his farm during the current taxable year.At the date of the sale,the farm had an adjusted basis of $212,000 and was encumbered by a mortgage of $190,000.The buyer paid him $110,000 in cash,agreed to take the title subject to the $190,000 mortgage,and agreed to pay him $80,000 with interest at 9 percent one year from the date of sale.How much is Louis' recognized gain on the sale?

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Definitions:

Bank Reconciliation

A process that explains the difference between the bank balance shown in an organization's bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records at a particular point in time.

Adjusting Journal Entries

Journal entries made at the end of an accounting period to account for incomes and expenses in the period they occur, ensuring that the financial statements are accurate.

Reconciliation Report

A document that compares two sets of records to ensure they are in agreement and accurate.

Bank Reconciliation

The process of comparing and adjusting a company's recorded balances to match the bank's figures, identifying any discrepancies.