On January 1, 2020, 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, 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

Respuesta :

Answer:

$35,323

Explanation:

Present value = Future value * PVF of single sum(n=3, i=9%)

Present value = $240,000 * 0.77218

Present value = $185,323

Book value = Cost of building - Accumulated depreciation

Book value = $250,000 - $100,000

Book value = $150,000

Gain on sale of building = Present value of note - Book value

Gain on sale of building = $185,323 - $150,000

Gain on sale of building = $35,323