Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exc
ID: 2512903 • Letter: E
Question
Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance.
**PLEASE SHOW YOUR WORK**
110. The gain to be recognized from the exchange is
a. $48,000
b. $60,000
c. $180,000
d. $240,000
Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance.
**PLEASE SHOW YOUR WORK**
111. The new equipment should be recorded at
a. $480,000.
b. $360,000.
c. $300,000.
d. $288,000.
Explanation / Answer
110.d.$240,000
Explanation:
Net value of equipment is $ 360,000
(660,000-300,000)
Fair value of exchange equipment $480,000
Cash received $120,000
Gain to be recognised from the exchange is $240,000
($480,000 +$120,000-360,000)
111.a. $480,000
New equipment should be recorded at fair value of exchanged equipment
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