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quipment with a fair value of $600,000 and book value of $360,000 (cost $660,000 and accumulated...

quipment with a fair value of $600,000 and book value of $360,000 (cost $660,000 and accumulated depreciation $300,000) is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance.

The new equipment should be recorded at

Group of answer choices

$480,000

$288,000.

None of the other answers are correct

$360,000.

$300,000

Business   Accounting   
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Homework Answers

Answer #1

Ans:

When a purchase of asset lacks for commercial substance it is to be recorded at the book value. When there is a commercial substance than asset is to be recorded at Fair Value.

So here asset has book value of $360,000 and lacks for commercial substance.

The new equipment should be recorded at $360,000.

Correct answer is option D.

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