Harper will exchange machines with either Austin or Lubin
Not what you're looking for?
Questions 2 & 3 are based on the following information. Harper is contemplating exchanging a machine used in its operation for a similar machine on May 31. Harper will exchange machines with either Austin Corporation or Lubin Company. The data relating to the machines are presented below. Assume the exchanges would have commercial substance.
Harper Austin Lubin
Original cost of machine $162,500 $180,000 $150,000
Accumulated depreciation thru May 31 98,500 70,000 65,000
Fair value 80,000 95,000 60,000
2.
If Harper exchanges its used machine and $15,000 cash for Austin's used machine, the gain that Harper should recognize from this transaction for financial reporting purposes would be;
a) $0
b) $2,526
c) $15,000
d) $16,000
3.
If Harper exchanges its used machine for Lubin's used machine and also receives $20,000 cash, the gain that Harper should recognize from this transaction for financial reporting would be
a) $0
b) $4,000
c) $16,000
d) $25,000
Purchase this Solution
Solution Preview
Both would give you $16,000 gains because there is economic substance (otherwise no gain) and they received $16,000 more than the book value of what they gave up. Here are the entries:
Question ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Operations Management
This quiz tests a student's knowledge about Operations Management
Learning Lean
This quiz will help you understand the basic concepts of Lean.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)