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Finger [1]
4 years ago
5

Ryan exchanged a car that he used in his business for the past 3 years for a new truck with a FMV of $25,000. This transaction t

ook place at the end of the year. The adjusted basis of the car was $8,000 at the beginning of the year of disposition. Ryan paid $4,000 cash and assumed a note payable of $10,000 to be paid in $2,000 increments over the next 5 years. Ryan’s depreciation on the car for the year of disposition was $2,500. What is the gain (loss) recognized on the transaction?
Business
1 answer:
alexandr1967 [171]4 years ago
3 0

Answer:

The gain on the transaction is $5,500

Explanation:

Gain on Transaction = Fair Value of Truck - Cash Paid - Note Payable - carrying value of car exchanged

= $25,000 - $4,000 - $10,000 - ( $8,000 - $2,500)  

= $25,000 - $4,000 - $10,000 - $5,500

= $5,500 Gain

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