X Corporation exchanged a warehouse located in New York for a warehouse located
ID: 2432259 • Letter: X
Question
X Corporation exchanged a warehouse located in New York for a warehouse located in New Jersey. The adjusted basis of the New York warehouse was $30,000. The fair market value of the New Jersey warehouse just prior to the exchange was $25,000. In addition to the warehouse, X Corporation also received $8,000 in cash.
54. The amount realized by X Corporation is:
$8,000
$33,000
$25,000
Zero
None of the above
The gain realized by X Corporation is:
$5,000
Zero
$3,000
None of the above
The gain recognized by X Corporation on the exchange is:
$8,000
$3,000
Zero
None of the above
The basis for X Corporation in the property received, the warehouse in New Jersey, is:
$33,000
$30,000
$25,000
None of the above
a.$8,000
b.$33,000
c.$25,000
d.Zero
e.None of the above
Explanation / Answer
The amount realized by X Corporation is $ 33000.
Reason: as warehouse amonting to $ 25000 and $ 8000 received in cash, so total amount realised is $ 33000.
The gain realized by X Corporation is $ 3000.
Reason: value of warehouse exchanged was $ 30000 and Toatal amount realised in cash $ 8000 and faire market value of warehouse $ 25000, total amount realised is $33000 less value of warehouse exchanged $30000. so net gain is $3000.
The gain recognized by X Corporation on the exchange is $ 3000.
4.The basis for X Corporation in the property received, the warehouse in New Jersey is $25000.
reason: As total realisation is faire value of warehouse received is $25000, so warehouse should be reconsed in asset side at $ 25000 and cash recieved amounting to $ 8000 should be debited to Cash account.
entry would be
warehouse (New Jersey) A/C------ Dr $25000
Cash A/C----------------------------------Dr $8000
To Warehouse ( New york) ---------- Cr $30000
To Profit and loss A/c-------------------Cr $ 30000
(being warehouse exchanged)
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