A seller accepted $240,000 in cash plus a vehicle with a verified cash value of $18,000 for a house. What price should be used as the cash equivalent sale price?
Correct Answer
C) $258,000
Non-cash items accepted by the seller as part of the consideration must be converted to cash equivalence and included in the price: $240,000 + $18,000 = $258,000.
Why This Is the Correct Answer
Option C is correct because non-cash items accepted by the seller as part of the consideration must be converted to cash equivalence and included in the price. The vehicle's verified cash value is $18,000. $240,000 + $18,000 = $258,000.
Why the Other Options Are Wrong
Option A: $240,000
Option A, $240,000, counts only the cash and ignores the vehicle. The seller also received an $18,000 vehicle, so the cash-equivalent price is $258,000.
Option B: $222,000
Option B, $222,000, deducts the vehicle's value: $240,000 − $18,000. The vehicle was received by the seller as part of the price, so it is added, giving $258,000.
Option D: $249,000
Option D, $249,000, counts only half the vehicle's value: $240,000 + $18,000 / 2. The vehicle's full verified cash value of $18,000 is included, giving $258,000.
Count everything the seller got
The cash-equivalent price is the cash plus the cash value of everything else the seller accepted.
How to use: Use this when a sale includes trades, goods or other non-cash consideration.
Exam Tip
Ask what the seller received in total; non-cash items accepted by the seller increase the cash-equivalent price.
Common Mistakes to Avoid
- -Using only the cash portion of the price
- -Subtracting non-cash consideration from the price
- -Counting only part of a non-cash item's value
Concept Deep Dive
Analysis
This question tests cash equivalency when a seller accepts non-cash consideration. The verified cash value of the vehicle is part of what the seller received and must be included. $240,000 + $18,000 = $258,000.
Background Knowledge
The sale price used in analysis should reflect the total consideration paid in cash-equivalent terms. When a buyer pays partly with property such as a vehicle, equipment or other real estate, that item's cash value is part of the price. Verifying the cash value of non-cash items is part of sale verification.
Real-World Application
Verifying a comparable, an appraiser learns the buyer paid $240,000 in cash plus a truck the seller wanted. The parties confirm the truck's cash value was $18,000. The appraiser records a cash-equivalent price of $258,000 for the comparable.
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