Question

Sunland Company received $147000 in cash and a used computer with a fair value of $390000...

Sunland Company received $147000 in cash and a used computer with a fair value of $390000 from Blossom Company for Sunland Company's existing computer having a fair value of $537000 and an undepreciated cost of $507900 recorded on its books. The transaction has no commercial substance. How much gain should Sunland recognize on this exchange, and at what amount should the acquired computer be recorded, respectively?

$29100 and $390000
$1547 and $242147
$147000 and $507900
$0 and $360900

Homework Answers

Answer #1

The correct answer is " $29,100 and $390,000".

Supporting calculations and explanations:

Cash received $147,000
Add: Fair value of the computer received in exchange $390,000
Total value of the benefit received in exchange $537,000
Less: The book value of the old computer sold (undepreciated value) ($507,900)
Gain on the exchange $29,100

For old computer sold, the undepreciated value or the book value should only be considered as the current fair value of the old computer is irrelevant to know the gain.

In case of new computer, the current fair value is the current cost so current fair value should be considered for the exchange.

Therefore, the new computer will be recorded at its current fair value of $390,000.

Hence, the correct answer is $29,100 and $390,000.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Loftin Company traded machinery with a book value of $950,000 and a fair value of $900,000....
Loftin Company traded machinery with a book value of $950,000 and a fair value of $900,000. It received in exchange from Thomas Company a machine with a fair value of $1,000,000. Loftin also paid cash of $100,000 in the exchange. Thomas’s machine has a book value of $950,000. What amount of gain or loss should Loftin recognize on the exchange (assuming lack of commercial substance)?
Loftin Company traded machinery with a book value of $950,000 and a fair value of $900,000....
Loftin Company traded machinery with a book value of $950,000 and a fair value of $900,000. It received in exchange from Thomas Company a machine with a fair value of $1,000,000. Loftin also paid cash of $100,000 in the exchange. Thomas’s machine has a book value of $950,000. What amount of gain or loss should Loftin recognize on the exchange (assuming lack of commercial substance)? Group of answer choices $ -0-. $100,000 gain $5,000 loss $50,000 loss
Question 17   Balcom Corporation acquires a coal mine at a cost of $1,500,000. Intangible development costs...
Question 17   Balcom Corporation acquires a coal mine at a cost of $1,500,000. Intangible development costs total $360,000. After extraction has occurred, Balcom must restore the property (estimated fair value of the obligation is $180,000), after which it can be sold for $510,000. Balcom estimates that 5,000 tons of coal can be extracted. What is the amount of depletion per ton? Question 17 options: A. $306 B. $510 C. $300 D. $372 Question 18 Messersmith Company is constructing a building....
Tallman Company traded machinery with a book value of $600,000 and a fair value of $1,000,000....
Tallman Company traded machinery with a book value of $600,000 and a fair value of $1,000,000. It received in exchange from Lewis Company a machine with a fair value of $900,000 and cash of $100,000. Lewis’s machine has a book value of $950,000. What amount of gain should Tallman recognize on the exchange (assuming lack of commercial substance)? Group of answer choices $40,000 $400,000 $ -0- None of the other answers are correct $100,000
Carla Vista Co. traded machinery with a book value of $580000 and a fair value of...
Carla Vista Co. traded machinery with a book value of $580000 and a fair value of $970000. It received in exchange from Sheridan Company a machine with a fair value of $873000 and cash of $97000. Sheridan’s machine has a book value of $921500. What amount of gain should Carla Vista recognize on the exchange (assuming lack of commercial substance)?
Iniesta Company traded machinery with original cost of $220,000 and accumulated depreciation of $30,000. It received...
Iniesta Company traded machinery with original cost of $220,000 and accumulated depreciation of $30,000. It received in exchange from Xavi Company a machine with a fair value of $200,000. Iniesta also paid cash of $20,000 in the exchange. Xavi’s machine has a book value of $190,000. What amount of gain or loss should Iniesta recognize on the exchange assuming the transaction lacks commercial substance? i know the answer, but please explain.
Beerbo Inc. traded a used truck for a small computer. Before this exchange of non-monetary assets...
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...
Alamos Co, exchanged equipment and $18,000 cash for similar equipment. The book value and the fair...
Alamos Co, exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000 respectively. Assuming that the exchange has commercial substance, Alamos would record a gain (loss) of: 26,000 8,000 <8,000> 0 Prepare the journal entry for the above transaction.
XYZ Co exchanged its asset A for Company BCD's asset B and received cash as part...
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?
Flat Tire Inc. exchanged equipment for three pickup trucks. The book value and fair value of...
Flat Tire Inc. exchanged equipment for three pickup trucks. The book value and fair value of the equipment given up were $40,000 (original cost of $75,000 less accumulated depreciation of $35,000) and $43,000, respectively. 1. Assume that Flat Tire Inc. paid $15,000 in cash and the exchange has commercial substance, at what amount will Flat Tire, Inc. value the pickup trucks? a. $67,000 b.. $75,000 c. $58,000 d. $43,000 2. Assume that Flat Tire Inc. paid $15,000 in cash and...