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    Exchange of assets

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    On August 1, 2007, Alpha Company exchanged productive assets with Beta Company. The following facts pertain to these assets as of August 1, 2007:

    Alpha Company

    Original Cost $96,000
    Accumulated Depreciation $45,000
    Fair Market Value $60,000
    Cash Paid by Alpha $15,000

    A) Assuming that the exchange has commercial substance, record the exchange in accordance with GAAP for Alpha Company.

    B) Assuming that the exchange lacks commercial substance, record the exchange in accordance with GAAP for Alpha Company.

    Thanks again for your time.

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    Solution Preview

    On August 1, 2007, Alpha Company exchanged productive assets with Beta Company. The following facts pertain to these assets as of August 1, 2007:

    Alpha Company

    Original Cost $96,000
    Accumulated Depreciation $45,000
    Fair Market Value $60,000
    Cash Paid by Alpha $15,000

    A) Assuming that the exchange has commercial substance, record the exchange in accordance with GAAP for Alpha Company.

    If the transaction has commercial ...

    Solution Summary

    The solution explains how to record the exchange of assets when there is commercial substance and there is no commercial substance in the transaction

    $2.19

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