whether First Company can use the installment method to report each transaction. If not how is the transaction reported? Assume First Company is an accrual basis taxpayer. a.First Company sold stock in a publicly held company costing $35000. First Company received a $20000 down payment and is to receive $20000 per year for two years plus interest. b.First Company sold land costing $150000. First Company received a $20000 down payment and is to receive $20000 per year for five years plus interest. c.First Company initiated credit sales of merchandise. The company previously sold mer- chandise only to cash customers. Cash sales this year totaled $4000000. Credit sales totaled $500000. At year end First Company has receivables of $100000. The com-
pany expects to collect only $85000 of the current receivables
Repossession. Lina an attorney sold an antique rug for $45000 that had been in her home. The rug cost Lina $12000 several years ago. Lina collected $15000 down and received a one-year interest bearing note for the balance. She is unable to collect the bal- ance and after incurring court costs of $500 she repossesses the rug. The rug is damaged when she recovers it and is now worth only $30000. a.How much gain must Lina report in the year of the sale? b.How much gain if any must Lina report in the year she repossesses the rug? c.What is the basis of the rug after the repossession?