Beerbo Inc. traded a used truck for a small computer. Before this exchange of non-monetary assets (ENMA), Beerbo's balance sheet show the used truck at a cost of $9,000 with an accumulated depreciation balance of $3,000. The fair value of the small computer was $5,000. Beerbo also paid $3,000 in the transaction.
Assume the ENMA has commercial substance.
What is the total fair value given by Beerbo in this transaction?
What is the total fair value received by Beerbo in this transaction?
How much must Beerbo record as the cost of the small computer received?
How much gain (loss) must Beerbo record from in this transaction? Input gains as positive numbers, losses as negative numbers (gains = 123; losses = -123).
Explanation :
When a company exchanges a fixed asset with another and the transaction has commercial substance, it records the asset acquired at its fair value or the fair value of assets given up, whichever is readily available.
General journal when asset exchange involves commercial substance :
| Date | Title/explanation | Debit | Credit |
| Small computer (fairvalue) | $ 5,000 | ||
| Loss on exchange | $ 4,000 | ||
| Truck ($9,000 - $3,000) | $ 6,000 | ||
| Cash | $ 3,000 |
1) total fairvalue given by beerbo is : $9,000
2) total fairvalue received by beerbo is : $5,000
3) beerbo should record cost of small computer received is : $5,000
4) beerbo should record the loss of: - $4,000
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