I know the answer for 92 is A and for 93 it is C. But I dont understand why you

Question

I know the answer for 92 is A and for 93 it is C. But I dont understand why you would record equipment for question 92 at book value plus cash paid while in 93 you record equipment at fair value plus cash paid. Why are they different?
Also, why do you record a loss for question 93 when you do not realize a gain or loss for exhanges with no commercial value? Cash is paid and not received so should the 25% rule of cash received not apply?
Use the following information to answer questions 92 &93 Below is the information relative to an exchange of assets by Stanton Company: e lacks commercial substance pany. The exchange Old Equipment Book Value Case $300,000 Case II $200,000 Fair Value $340,000 $180,000 Cash Paid $60,000 $28,000

Explanation / Answer

If Commercial Substance Lacks than Asset would be recorded at

Lower of Book Value or Fair value of old asset + Cash Payment if any - Cash Recieved if any,

It is Prudent to record loss & not gain as per GAAP if  Commercial Substance Lacks

In this Case

Q92

Asset Would be recorded at = Lower of 300000 or 340000 + 60000

Asset Would be recorded at = 300000 + 60000

Asset Would be recorded at = $ 360000

Gain or Loss = Old Equipment implied Sale Value - Book Value

Gain or Loss = 300000 - 300000

Gain or Loss = 0

Q93

Asset Would be recorded at = Lower of 200000 or 180000 + 28000

Asset Would be recorded at = 180000 + 28000

Asset Would be recorded at = $ 208000

Gain or Loss = Old Equipment implied Sale Value - Book Value

Gain or Loss = 180000 - 200000

Gain or Loss = -20000

Note : If there is Commercial Substance than Asset would be recorded at

Fair value of old asset + Cash Payment if any - Cash Recieved if any

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