Calaveras Tire exchanged machinery for two pickup trucks. The book value and fai

Question

Calaveras Tire exchanged machinery for two pickup trucks. The book value and fair value of the machinery were $35,000 (original cost of $87,500 less accumulated depreciation of $52,500) and $46,500, respectively. To equalize fair values, Calaveras paid $6,500 in cash.

Assume the exchange has commercial substance. How much gain or loss will the company recognize on the exchange?

Calaveras Tire exchanged machinery for two pickup trucks. The book value and fair value of the machinery were $35,000 (original cost of $87,500 less accumulated depreciation of $52,500) and $46,500, respectively. To equalize fair values, Calaveras paid $6,500 in cash.

Explanation / Answer

Hi,

Please find the detailed answer as follows;

Part A:

Value of Pickup Trucks = Book Value of Machinery + Cash Paid = 35000 + 6500 = 41500

Part B:

Gain or Loss Recognized on the Exchange = 35000 (Book Value) - 46500 (Fair Value) = -11500

Loss on Exchange = -11500

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects