Sunday, August 17, 2014

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.

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.
correct $8,000.
$(8,000).
$0.
  Equipment-new (FV of old + $18,000) 108,000     
     Cash   18,000   
     Equipment-old (book value)   82,000   
     Gain ($90,000 – 82,000)   8,000