Question

Johnson borrowed $45,000 secured by land with a basis of $20,000. Johnson could not pay the principal, so the bank foreclosed and sold the land for $35,000 as full settlement of the debt. What income should Johnson recognize

Answer 1

Answer:

the income that should be recognized is $25,000

Explanation:

The computation of the income that should Johson recognized is shown below:

Income To be recognized is

= Borrowings amount - Basis of land

= $45000 - $20000

= $25,000

hence, the income that should be recognized is $25,000

We simply applied the above formula so that the correct value could come

And, the same is to be considered