Nicholas bought land from meredith for $150,000. nicholas paid $50,000 cash and gave meredith an 8% note for $100,000. the note was to be paid over a five-year period. when the balance on the note was $80,000, meredith began having financial difficulties. to accelerate her cash inflows, meredith agreed to accept $60,000 cash from nicholas in final payment of the note principal.
a. nicholas must recognize $20,000 ($80,000 - $60,000) of gross income.
b. meredith must recognize gross income of $20,000 ($80,000 - $60,000) from discharge of the debt.
c. nicholas is not required to recognize gross income, but must reduce his cost basis in the land to $130,000.
d. nicholas is not required to recognize gross income, since he paid the debt before it was due.
e. none of these choices are correct.

Ultravision inc. anticipates sales of $280,000 from january through april. materials will represent 50 percent of sales, and because of level production, material purchases will be equal for each month during the four months of january, february, march, and april. materials are paid for one month after the month purchased. materials purchased in december of last year were $24,000 (half of $48,000 in sales). labor costs for each of the four months are slightly different due to a provision in the labor contract in which bonuses are paid in february and april. the labor figures are: january $14,000 february 17,000 march 14,000 april 19,000 fixed overhead is $10,000 per month. prepare a schedule of cash payments for january through april. (assume the $280,000 of sales occur equally over the four months of january through april, i.e. monthly sales = $280,000 / 4.)