The following information pertains to a sale of real estate by Ryan Co. to Sud Co. on December 31, 2005:
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Carrying amount |
$2,000,000 |
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Sales price: |
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Cash |
$ |
300,000 |
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Purchase money mortgage |
2,700,000 |
3,000,000 |
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The mortgage is payable in nine annual installments of $300,000 beginning December 31, 2006, plus interest of 10%. The December 31, 2006, installment was paid as scheduled, together with interest of $270,000. Ryan uses the cost recovery method to account for the sale. What amount of income should Ryan recognize in 2006 from the real estate sale and its financing?
- $570,000
- $370,000
- $270,000
- $0