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 $1,860,600 in cash. The purchaser is to assume Peyton's mortgage of $1,116,360 on the property. To enable the purchaser to obtain adequate financing, Peyton is to pay the $111,636 in points charged by the lender. The broker's commission on the sale is $74,424. What is Peyton's amount realized?

Answer 1

The amount realized by Peyton from the sale of the office building and land is $2,789,900, which is calculated by adding the cash received and the mortgage assumed by the purchaser, then subtracting the points paid and the broker's commission.

Step-by-step explanation:

The amount realized from the sale of an asset is the total consideration received from the sale minus any selling expenses. In Peyton's case, the amount realized would be the sum of cash received from the sale and the mortgage assumed by the purchaser, reduced by the points Peyton paid and the broker's commission. Therefore, the calculation for Peyton's amount realized is as follows:

• Cash received: $1,860,600
• Mortgage assumed by the purchaser: $1,116,360
• Less: Points paid by Peyton: $111,636
• Less: Broker's commission: $74,424

Amount realized = $1,860,600 + $1,116,360 - $111,636 - $74,424 = $2,789,900.