Saada Corporation sells a building it owned to Paris, who finances the purchase by obtaining a $200,000 loan and pays an additional $20,000 in cash. As part of the sales agreement, Saada agrees to pay the $4,000 in points that Paris had to pay to obtain the loan. The corporation incurs commission costs of $12,000 and $5,000 in legal fees in making the sale.
The gross sales price is $216,000. The $200,000 loan and the $20,000 cash payment is reduced by the $4,000 of points Saada paid on Paris’ loan. The $17,000 ($12,000 + $5,000) of commissions and various legal fees reduce the amount realized to $199,000:
Cash received $ 20,000
Value of loan payable 200,000
Less: Points paid (4,000)
Gross sales price $ 216,000
Less: Commissions $ 12,000
Legal fees 5,000 (17,000)
Amount realized $ 199,000
