Question

XYZ Co exchanged its asset A for Company BCD's asset B and received cash as part of the exchange. The exchange has commercial substance. XYZ Co. should defer the gain in this transaction by reducing the cost of the new asset (asset B). True or False?

Answer 1

Exchange of assets which have commercial substance should be accounted at fair value of the assets exchanged

Yes, XYZ Co should defer the gain or loss in this transaction by reducing the cost from proceeds of exchange

The answer is True

for example  

An old truck has a fair value $100000 , cost $1000000 and accumulated depreciation $750000 and it is exchanged for a boat having fair value off $150000, the company also paid $50000cash

book value is $250000+$50000 = $300000

Loss is $150000-$300000 = $150000