Kyle sold land on the installment basis for $100,000.His basis in the land was $70,000.Kyle received a $40,000 down payment and a real estate installment sale contract calling for $60,000 in additional payments in future years.In addition,Kyle paid $6,000 in commissions on the sale.What is the gross profit to be recognized in the current year?
A)$0
B)$9,600
C)$12,000
D)$24,000

Question

Quizplus · Accepted Answer

Gross profit = (Selling price - Basis) x (Down payment / Contract price) - Commissions= ($100,000 - $70,000) x ($40,000 / $100,000) - $6,000= $30,000 x 0.4 - $6,000= $12,000 - $6,000= $9,600

Kyle Sold Land on the Installment Basis for $100,000