Peroni Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year. What is Peroni's recognized gain in the current and subsequent year, respectively? a. $0, $50,000.b. $10,000, $40,000.c. $25,000, $25,000.d. $50,000, $0.e. None of the choices are correct.

Respuesta :

Answer:

Option (c) is correct.

Explanation:

Gross profit on sale :

= (Land value - Basis) ÷ Land value

= (300,000 - 250,000) ÷ 300,000

= 0.1667

= 16.67%

Therefore,

Gain recognized in :

Year 1 :

= Cash received × Gross profit percent

= 150,000 × 16.67%

= 25,000

Year 2 :

= Note value× Gross profit percent

= 150,000 × 16.67%

= 25,000