A machine cost 120,000 has annual depreciation of 20,000 and has accumulated depreciation of 90,000 on December 31, 2006. A) The gain to be recorded on the exchange is what dollar amount? B) The new machine should be recorded at what dollar amount?
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A machine cost 120,000 has annual depreciation of 20,000 and has accumulated depreciation of 90,000 on December 31, 2006. On April 1, 2007 when the machine has a market value of 27,500, it is exchanged for a machine with a fair value of 135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.
A) The gain to be recorded on the exchange is what dollar amount?
B) The new machine should be recorded at what dollar amount?
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Solution Summary
Computations for accumulated depreciation of 90,000 is determined.
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The machine's book value is $25,000 (120,000 - 90,000) - (20,000/4) 2007 depreciation
The gain is the difference in the book value and the FMV (27,500 - ...
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