Chen Corporation sells land (a noninventory item) with a basis of $60,000 for $120,000. Chen will be paid on an installment basis in five equal annual payments, starting in the current year. The E&P for the year of sale will be increased as a result of the sale (excluding federal income taxes) by
A) $0.
B) $8,600.
C) $43,000.
D) $48,000.
| Sale of land (non inventory) | ||
| Cost | 60000 | |
| Sale price | 120000 | |
| Payment in 5 equal annual installments | ||
| Total Profit on sale | = | 120000-60000 |
| = | 60000 | |
| Increase in Earnings & profit in the year of sale | = | 60000 / 5 *4 |
| = | 48000 | |
| So the correct answer choice is D |
Chen Corporation sells land (a noninventory item) with a basis of $60,000 for $120,000. Chen will...