Raptor Company owns a tract of land that it purchased in 2008 for $200,000. The
ID: 2330239 • Letter: R
Question
Raptor Company owns a tract of land that it purchased in 2008 for $200,000. The land is held as a future plant site and has a fair market value of $280,000 on July 1, 2014. Talon Company also owns a tract of land held as a future plant site. Talon paid $360,000 for the land in 2013 and the land has a fair market value of $380,000 on July 1, 2014. On this date, Raptor exchanged its land and paid $100,000 cash for the land owned by Talon. The exchange had commercial substance. At what amount should Raptor record the land acquired in the exchange?A) $280,000 B) $300,000 C) $380,000 D) $320,000 Raptor Company owns a tract of land that it purchased in 2008 for $200,000. The land is held as a future plant site and has a fair market value of $280,000 on July 1, 2014. Talon Company also owns a tract of land held as a future plant site. Talon paid $360,000 for the land in 2013 and the land has a fair market value of $380,000 on July 1, 2014. On this date, Raptor exchanged its land and paid $100,000 cash for the land owned by Talon. The exchange had commercial substance. At what amount should Raptor record the land acquired in the exchange?
A) $280,000 B) $300,000 C) $380,000 D) $320,000
Explanation / Answer
The fair value of the Raptor Company's tract of land is $280,000 on July 1, 2014. Cash paid by Raptor Company to exchange the land is $100,000.
This $380,000 ($280,000 plus $100,000) is deemed to be the fair value of the land acquired in the exchange.
Therefore, Raptor should record an amount $380,000 for the land acquired in the exchange.
Answer: C. $380,000
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