# company abc sells loans with a 2 200 fair value and a carrying amount of 2 000 abc c 604414

Items 1 through 3 are based on the following:

Company ABC sells loans with a \$2,200 fair value and a carrying amount of \$2,000. ABC Company obtains an option to purchase similar loans and assumes a recourse obligation to repurchase loans. ABC Company also agrees to provide a floating rate of interest to the transferee company. The fair values are listed.

align=”left”>

 Fair values Cash proceeds \$2,100 Interest rate swap 140 Call option 80 Recourse obligation (120)

What is the gain (loss) on the sale?

1. \$ 320
2. \$ 200
3. \$(100)
4. \$ 120

The journal entry to record the transfer for ABC Company includes

1. A debit to call option.
2. A credit to interest rate swap.
3. A debit to loans.
4. A credit to cash.

Assume for this problem that ABC Company agreed to service the loans without explicitly stating the compensation. The fair value of the service is \$50. What are the net proceeds received and the gain (loss) on the sale?

align=”left”>

 Net proceeds received Gain (loss) a. \$2,200 \$ 200 b. \$2,250 \$ 250 c. \$2,150 \$ 150 d. \$2,200 \$(250)