USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (2)
QUESTIONS:
ABC Company exchanged equipment used in its manufacturing
operations for a similar piece of equipment used in the operations
of XYZ Corporation. The following information pertains to the
exchange. The exchange lacks commercial substance.
ABC Company XYZ Company
Equipment (costs) $28,000 $34,000
Accumulated Depreciation 12,000 10,000
Fair Value of Equipment 0 28,500
Cash given up 7,000 0
Determine the Historical Cost of the New Asset ABC should
report on their balance sheet as a result of this exchange as well
as the gain or loss from the exchange.
Historical Cost of New Equipment for ABC
Gain/Loss on the Exchange
*To record your answer for a gain or loss, if you want to
report a gain, enter your answer as a positive number. If you want
to report a loss, enter your answer as a negative number. If no
gain or loss is reported, enter your answer as NE for No Effect.
Example: If you want to report a loss of $2,000, enter your answer
as (2000).
B. Using the information presented in #9 above, determine the
Historical Cost of the New Asset XYZ should record on their Balance
Sheet as well as the Gain/Loss on the Exchange.
Original Cost of New Equipment to XYZ Gain/Loss to be
Recognized