[Anonymous]

I have hard time understanding installment sales problems. Can anyone help me solve this problem?

A sold land with an adjusted basis of $20, 000 and paid a selling expense of $1,000. The buyer assumed an existing mortgage of $15,000 and agreed to pay A $10, 000 over the next 5 years starting from this year. A’s installment sale income for the current year is?

The answer is $800. Do you know why?

[evesocal]

The profit on the sale is $4,000. ($25,000 total sales price less $20,000 basis less $1,000 selling expenses).

The contract price is the $10,000 A will get over the term of the contract.

So the gross profit percentage is 40%: $4,000 / $10,000.

A will get $2,000 per year for 5 years, so $2,000 x 40% = $800.

B: 75
R: 80
A: 77
F: 81
Ethics: 84, 92 and done!
Licensed in California

[evesocal]

The profit on the sale is $4,000. ($25,000 total sales price less $20,000 basis less $1,000 selling expenses).

The contract price is the $10,000 A will get over the term of the contract.

So the gross profit percentage is 40%: $4,000 / $10,000.

A will get $2,000 per year for 5 years, so $2,000 x 40% = $800.

B: 75
R: 80
A: 77
F: 81
Ethics: 84, 92 and done!
Licensed in California

[Anonymous]

Thank you! It helps me a lot!!

[Anonymous]

Thank you! It helps me a lot!!

[evesocal]

You're quite welcome. Good luck!

B: 75
R: 80
A: 77
F: 81
Ethics: 84, 92 and done!
Licensed in California

[evesocal]

You're quite welcome. Good luck!

B: 75
R: 80
A: 77
F: 81
Ethics: 84, 92 and done!
Licensed in California

[Author]

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