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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.


Fair values

Cash proceeds


Interest rate swap


Call option


Recourse obligation


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?


Net proceeds received

Gain (loss)



$ 200



$ 250



$ 150




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