USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (2) QUESTIONS: ABC Company exch

Question

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 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 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

Explanation / Answer

To answer both the question, let’s analyze both the cases:

Historical cost for ABC company would be $28,500 since it is fair value of machine.

$7,000 inflow happened in form of fixed asset ($0) and cash $7,000 for an exchange of book value of $24,000. XYZ will recognize a loss of - $17,000 ($7000 - $24000).

Historical cost for XYZ company would be $0, since it is fair value of machine.

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