Calaveras Tire exchanged equipment for two pickup trucks. The book value and fai
ID: 2423137 • Letter: C
Question
Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment were $20,000 (original cost of $65,000 less accumulated depreciation of $45,000) and $17,000, respectively. To equalize fair values, Calaveras paid $8,000 in cash. Assume the exchange has commercial substance.
How much gain or loss will the company recognize on the exchange?
Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment were $20,000 (original cost of $65,000 less accumulated depreciation of $45,000) and $17,000, respectively. To equalize fair values, Calaveras paid $8,000 in cash. Assume the exchange has commercial substance.
Explanation / Answer
Fair Value of the pickup trucks = $17,000 +$8,000
= $25,000
Loss = $20,000 -$17,000
=$3,000
journal entry
Fair Value of the pickup trucks = $17,000 +$8,000
= $25,000
Loss = $20,000 -$17,000
=$3,000