Answer:
1. The amount of gain should be reported: $37,983
2. The answer is $291,131
Explanation:
1.
The actual consideration's receipt is the present value of the cash flow from the note which is calculated as 249,400 / ( 1+9%)^3 = $192,582.5599
The Net book value of asset = Original cost - accumulated depreciation = 260,300 - 105,700 = $154,600
=> Gain on sales = $192,582.5599 - $154,600 = $37,983
2.
To determine the amount needs to paid out for the purchase, determine the price per stock first.
The stock price will be determined as the present value of cash flows from bonds, discounted at yield to maturity.
We have: Annual coupon payment = 1,000 x 9% = $90
=> Stock price = (90/11%) x ( 1 - 1.11^-10) + 1,000/1.11^10 = 882.21536
=> Amount need to be paid for the purchase = stock price x bond purchased = 882.21536 x 330 = $291,131
