A vacant lot is acquired for $83,000 cash. Later the owner borrows $52,000 against the land. Three years later, the lot is then sold for $127,000 in cash. After receiving the $127,000 sales price in cash, the seller pay off the loan of the $52,000 owed. What is the effect of the $52,000 payment of the loan on the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity?
A vacant lot is acquired for $83,000 cash. Later the owner borrows $52,000 against the land. Three years later, the lot is then sold for $127,000 in cash. After receiving the $127,000 sales price in cash, the seller pay off the loan of the $52,000 owed. What is the effect of the $52,000 payment of the loan on the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges
Section: Chapter Questions
Problem 9P
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A vacant lot is acquired for $83,000 cash. Later the owner borrows $52,000 against the land. Three years later, the lot is then sold for $127,000 in cash. After receiving the $127,000 sales price in cash, the seller pay off the loan of the $52,000 owed. What is the effect of the $52,000 payment of the loan on the total amount of the seller’s (1) assets, (2) liabilities, and (3)
- Assets increase $127,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000
- The payment of the loan has no net effect on any of the categories
- Assets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000
- Assets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity is unchanged
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