Exchange lacking commercial substance
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Equipment that cost $66,000 and has accumulated depreciation of $30,000 is exchanged for equipment with a fair value of $48,000 and $12,000 cash is received. The exchange lacked commercial substance.
The gain to be recognized from the exchange is
a. $4,800 gain.
b. $6,000 gain.
c. $18,000 gain.
d. $24,000 gain.
The new equipment should be recorded at
a. $48,000.
b. $36,000.
c. $30,000.
d. $28,800.
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Solution Summary
Rules governing this type of transaction are discussed and solution shown in detail in Excel.
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