Kevin sold property with an adjusted basis of $58,000.The buyer assumed Kevin's existing mortgage of $40,000 and agreed to pay an additional $60,000 consisting of a cash down payment of $40,000,and payments of $4,000,plus interest,per year for the next 5 years.Kevin paid selling expenses totaling $2,000.What is Kevin's gross profit percentage?
A)33 1/3%
B)40%
C)60%
D)66 2/3%

Question

Quizplus · Accepted Answer

Kevin's gross profit is calculated as the total selling price minus the adjusted basis and selling expenses. The total selling price is the assumed mortgage ($40,000) plus the cash down payment ($40,000) plus the total of the installment payments ($4,000 * 5 = $20,000), which equals $100,000. The gross profit is $100,000 - $58,000 - $2,000 = $40,000. The gross profit percentage is ($40,000 / $60,000) * 100% = 66 2/3%.

Kevin Sold Property with an Adjusted Basis of $58,000