Alice Corp. is contemplating exchanging a machine used in its operations for ano

Question

Alice Corp. is contemplating exchanging a machine used in its operations for another machine. Alice will exchange machines with either Tweedledee Inc. or Tweedledum Co. The data relating to the machines is presented below. Assume Alice and Tweedledee Inc. exchange machines and the transaction has commercial substance. If Alice exchanges its used machine and pays $25,000 in cash, determine the value Alice should record for the asset received. Determine the gain/loss Alice should recognize in part (a), if any. Assume Alice and Tweedledum Co. exchange machines and the transaction lacks commercial substance. If Alice exchanges its used machine and also receives $22,000 cash from Tweedledum, determine the value Alice should record for the asset received. Determine the gain/loss Alice should recognize in part (c), if any.

Explanation / Answer

Fair Value for Tweedledee Inc. = 180000 - 70000 = $110,000

Fair Value for Tweedledee Co = 150000 - 65000 = $85,000

(a) Amount to be recorded by Alice = $110,000

(b) Loss to be recognized = (200000 + 25000) - (110000+70000) = $45,000

(c) Amount recorded by Alice = 85,000

(d) loss to be recognized = (200000 - 150000-22000) = $28,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.