Question

Please do it by type not pics. 1.Wille Co. trades a used truck for a used...

Please do it by type not pics.

1.Wille Co. trades a used truck for a used car. The trade has been decided to lack commercial substance. The used truck had an original cost of $15,000 and accumulated depreciation of $7,500. The used truck has a fair value of $11,000. The car has a fair value of $9,000. In addition to the car, you receive $2,000. Calculate the amount of gain that will be recognized.

Homework Answers

Answer #1

The used truck had an original cost of $15,000 and accumulated depreciation of $7,500.

Hence, book value of truck= Original cost - Accumulated depreciation

= 15,000 - 7,500

= 7,500

In exchange of truck, car with a fair value of $9,000 and $2,000 cash is received.

Hence, the amount of gain in the transaction = Car + Cash - Book value of truck

= 9,000 + 2,000 - 7,500

= $3,500

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