Below is information relative to an exchange of similar assets by Global Corp. A

ID: 2532943 • Letter: B

Question

Below is information relative to an exchange of similar assets by Global Corp. Assume the exchange has commercial substance.

27. In Case A, Global would record the new equipment at:

A. $75,000.

B. $50,000.

C. $65,000.

D. $60,000.

28. In Case B, Global would record a gain/(loss) of:

A. $3,000.

B. $(5,000).

C. $5,000.

D. $(3,000).

Old Equipment: Book Value Fair Value Cash Paid Case A $50,000 $60,000 $15,000 Case B $40,000 $35,000 $8,000

Solution 27:

In Case A, Global would record the new equipment at $60,000.

Answer is D.

New equipment is recorded at the old equipment fair value.

Solution 28: In Case B, Global would record a gain/(loss) of 40,000-35,000= 5,000 gain

Answer is C.

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