On July 25 of this year, Raj sold land with a cost of $15,000 for $40,000. Raj collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest. Raj's gain recognized this year is

Question

Quizplus · Accepted Answer

Raj's total gain is $25,000 ($40,000 - $15,000). The gain recognized this year is based on the proportion of cash received this year to the total selling price. Raj received $20,000 this year, which is 50% of the total selling price ($40,000). Therefore, the recognized gain this year is 50% of the total gain, which is $12,500.

On July 25 of This Year, Raj Sold Land with a Cost