Question

peyton sells an office building and the associated land on may 1 of the current year. under the terms of the sales contract, peyton is to receive $2,452,400 in cash. the purchaser is to assume peyton's mortgage of $1,471,440 on the property. to enable the purchaser to obtain adequate financing, peyton is to pay the $29,429 in points charged by the lender. the broker's commission on the sale is $98,096. what is peyton's amount realized?

Answer 1

Peyton's amount realized is $3,796,315, which is the sum of cash received and the assumed mortgage, minus the cost of points and broker's commission.

Step-by-step explanation:

To calculate Peyton's amount realized from the sale of the office building and associated land, you need to account for several components of the transaction. The amount realized is the total consideration received from the sale minus any selling expenses.

Peyton receives $2,452,400 in cash. The purchaser is also assuming Peyton's mortgage, which is an additional $1,471,440. However, Peyton is responsible for paying $29,429 in points to enable the purchaser's financing and has to pay a broker's commission of $98,096. The amount realized is therefore:

• Cash received: $2,452,400
• Mortgage assumed by purchaser: +$1,471,440
• Less: Points paid by Peyton: -$29,429
• Less: Broker's commission: -$98,096

Summing these amounts gives Peyton's amount realized from the sale. The calculation is as follows:

$2,452,400 (cash received) + $1,471,440 (mortgage assumed) - $29,429 (points) - $98,096 (commission) = $3,796,315 (amount realized).