Question

Kane Corp. obtained a business loan from a bank. A year later, the company transferred the ownership of one of its properties to the bank as settlement of its loan. In this instance, in which way did Kane Corp. dispose of its property?
A.
sale for profit
B.
like-kind exchange
C.
debt repayment
D.
repossession
E.
abandonment

Answer 1

Answer: E. abandonment

In this case, the business gives up the ownership of one of properties with the intention of settling its loan taken by the company. So, the business is said to have disposed of its property by abandonment.

Here, abandonment is used in sense of relinquish which means to give up possession or control over something usually in favor of someone else.

Answer 2

Answer:

D. repossession is the correct answer.

Explanation:

Repossession is defined as the action of retaking possession of something, in particular when a buyer defaults on payments. In the question, Kane Corp. is the debtor since they weren't able to pay the bank for the loan. So, if the bank receives one of the properties, it is considered as repossession, so it is the correct answer.