Artworld, Inc., sells its building to Paula for $22,000 in cash. As part of the sales agreement, Paula agrees to assume Artworld’s $90,000 mortgage on the property
Artworld, Inc., sells its building to Paula for $22,000 in cash. As part of the sales agreement, Paula agrees to assume Artworld’s $90,000 mortgage on the property
Artworld’s amount realized is $112,000. Artworld receives $22,000 of cash and has its $90,000 mortgage assumed in the sale. The debt assumption is equivalent to the payment of $90,000 of cash, which is then used to pay off the debt.
