Malea sold a machine for $140,000.The machine originally cost $90,000 and $10,000 of MACRS depreciation had been allowable.The buyer assumed an existing loan of $40,000,paid $20,000 cash down and agreed to pay $10,000 per year for eight years plus interest.Selling expenses are $10,000.The contract price is
A)$40,000.
B)$80,000.
C)$100,000.
D)$130,000.

Question

Quizplus · Accepted Answer

The contract price is the total amount that the buyer agreed to pay for the machine. 
So, we need to calculate the remaining amount that the buyer agreed to pay after the down payment and the loan assumption.

Remaining amount = (Selling price - Loan assumed - Down payment) + Total installment payments
Remaining amount = ($140,000 - $40,000 - $20,000) + ($10,000 x 8)
Remaining amount = $80,000

Therefore, the contract price is $80,000. However, we need to add the $10,000 selling expenses that the seller incurred, which gives us a total of $90,000.

But, we also need to adjust for the $10,000 of MACRS depreciation that was allowable, which reduces the original cost of the machine to $80,000.

Hence, the final contract price is $80,000 + $10,000 - $10,000 = $100,000.

Therefore, the best choice is C.

Malea Sold a Machine for $140,000