Calaveras Tire exchanged machinery for two pickup trucks. The book value and fai
ID: 2504045 • Letter: C
Question
Calaveras Tire exchanged machinery for two pickup trucks. The book value and fair value of the machinery were $40,000 (original cost of $95,000 less accumulated depreciation of $55,000) and $27,000, respectively. To equalize fair values, Calaveras paid $9,000 in cash.
Calaveras Tire exchanged machinery for two pickup trucks. The book value and fair value of the machinery were $40,000 (original cost of $95,000 less accumulated depreciation of $55,000) and $27,000, respectively. To equalize fair values, Calaveras paid $9,000 in cash.
Explanation / Answer
At what amount will Calaveras value the pickup trucks?
VALUE OF PUCK UP TRUCKS [BOTH THE TRUCKS] = 27000+9000
= 36000
VALUE OF EACH PICK UP TRUCK = 36000/2
= 18000EACH
Assume the exchange has commercial substance. How much gain or loss will the company recognize on the exchange?
IT WILL RECOGNISE A PROFIT OF $13000 [40000 - 27000]
At what amount will Calaveras value the pickup trucks?
VALUE OF PUCK UP TRUCKS [BOTH THE TRUCKS] = 27000+9000
= 36000
VALUE OF EACH PICK UP TRUCK = 36000/2
= 18000EACH