Copier A has a fair market value of $180,000 that cost $220,000 and has accumula

Question

Copier A has a fair market value of $180,000 that cost $220,000 and has accumulated depreciation of S120.000 is exchanged for a new copier with a list price of $300,000 and no cash is received 21. Assuming the exchange has commercial substance, the gain to be recognized from the exchange is $40,000 c. $60,000 22. Assuming the exchange has commercial substance, the new copier should be recordedat a 5300,000 b. 5120,000 c. $100,000. d. $180,000. 23. Assuming the exchange lacks commercial substance, the gain to be recognized from the exchange is b. $40,000 c. $60,000 d. $80,000 24. Assuming the exchange lacks commercial substance, the new copier should be recorded at $300,000. b. $120,000. c. $100,000. d. $180,000

Explanation / Answer

Cost = 220,000

Accumulated depreciation = 120,000

Carrying value = Cost - Accumulated depreciation

= 220,000 - 120,000 = 100,000

21.

Gain = Fair value of the asset given up - Carrying value of the asset given up

= 180,000 - 100,000

= 80,000

22.

New copier = 180,000

23.

Gain = Fair value of the asset given up - Carrying value of the asset given up

= 180,000 - 100,000

= 80,000

24.

Gains are not recognized when no cash is received or paid.

New copier = 100,000

New copier (plug) 180,000 Accumulated depreciation 120,000 Copier A 220,000 Gain 80,000

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