On January 1, 2010 the Hogback Company sold the Red Rocks Ranch, which constituted 20,000 acres of undeveloped land, to a limited partnership for $50 million. The land had originally cost Hogback $5 million. The terms of the sale included a cash payment of $9 million and a 10% note for $41 million to be paid in equal annual installments for 30 years. The note is secured by the land. Hogback paid a commission to a real estate company of 5% on the selling price.

Required
1. Should Hogback record the transaction as a sale? If so, prepare all the journal entries for 2010.
2. Assume, instead, that the company uses the installment method. Prepare all the journal entries for 2010.
3. Assume, instead, that the payments made to the Hogback Company were returnable at the option of the purchaser until June 30, 2011. Prepare all the journal entries for 2010. Ignore the sales commission.
4. Assume, instead, that the Hogback Company is obligated to make improvements costing $4 million over the next three years. In 2010 it made improvements costing $1 million. Prepare all the journal entries for 2010.
5. If the Hogback Company were the general partner of the limited partnership, would your answer to Requirement 1 change? If it were a limited partner?