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Louis owns three pieces of land with an adjusted basis as follows: parcel A, $75,000; parcel B, $125,000; and parcel C, $175,000. Louis sells parcel A to his uncle for $50,000, parcel B to his partner for $120,000, and parcel C to his mother for $150,000.

a. What is the recognized gain or loss from the sale of each parcel?

Answer :

akiran007

Answer:

Total recognized  Loss= $ 25,000 + $ 5,000 + $ 25,000= $ 55,000

Explanation:

The journal entries would be

Sr. No                       Accounts                             Dr.                     Cr.

1                              Uncle                             $ 50,000

                            Loss (Profit & Loss A/c)    $ 25,000

                            Parcel  A                                                           $ 75,000

2.                           Partner                              $ 120,000

                              Loss (Profit & Loss A/c)    $ 5,000

                            Parcel  B                                                           $ 125,000

3.                          Mother                              $ 150,000

                              Loss (Profit & Loss A/c)    $ 25,000

                            Parcel  B                                                           $ 175,000

Recognized gain or loss is the simply the gain or loss obtained from the difference between the sale value and the price of the asset

Total recognized  Loss= $ 25,000 + $ 5,000 + $ 25,000= $ 55,000

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