Refer to LaGrow Developers.Assume that LaGrow uses the installment sales method.The buyer defaulted on the note receivable after making the down payment.At the date of repossession,the land had a fair value of $5,000,000.What will be the gain or loss on repossession?
A)$0 gain or loss
B)$1,000,000 loss
C)$1,000,000 gain
D)$2,000,000 gain

Question

Quizplus · Accepted Answer

Under the installment sales method, when a buyer defaults and the property is repossessed, the gain or loss is typically not recognized at the time of repossession. Instead, the property is recorded at its fair value, and any previous profit recognized is reversed. Therefore, there is no gain or loss recognized at the time of repossession.