Appendix EX 10-25 Asset traded for similar asset
A printing press priced at a fair market value of $400,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press.
a. Assuming that the trade-in allowance is $175,000, what is the amount of cash given?
b. Assuming that the book value of the press traded in is $160,000, what is the gain or loss on the exchange?
Answer:
a.
Price (fair market value) of new equipment ............................... $400,000
Trade-in allowance of old equipment ......................................... 175,000
Cash paid on the date of exchange ............................................ $225,000
b.
Price (fair market value) of new equipment......................... $400,000
Less assets given up in exchange:
Book value of old equipment.............................. $160,000
Cash paid on the exchange.................................. 225,000 385,000
Gain on exchange of equipment...................................... $ 15,000
Appendix EX 10-26 Asset traded for similar asset
Assume the same facts as in Exercise 10-25, except that the book value of the press traded in is $185,000.
(a) What is the amount of cash given?
(b) What is the gain or loss on the exchange?
Answer:
a.
Price (fair market value) of new equipment ............................... $400,000
Trade-in allowance of old equipment ......................................... 175,000
Cash paid on the date of exchange ............................................ $225,000
b. Price (fair market value) of new equipment ...................... $400,000
Less assets given up in exchange:
Book value of old equipment................................ $185,000
Cash paid on the exchange.................................. 225,000 410,000
Loss on exchange of equipment...................................... $ 10,000
a. Assuming that the trade-in allowance is $175,000, what is the amount of cash given?
b. Assuming that the book value of the press traded in is $160,000, what is the gain or loss on the exchange?
Answer:
a.
Price (fair market value) of new equipment ............................... $400,000
Trade-in allowance of old equipment ......................................... 175,000
Cash paid on the date of exchange ............................................ $225,000
b.
Price (fair market value) of new equipment......................... $400,000
Less assets given up in exchange:
Book value of old equipment.............................. $160,000
Cash paid on the exchange.................................. 225,000 385,000
Gain on exchange of equipment...................................... $ 15,000
Appendix EX 10-26 Asset traded for similar asset
Assume the same facts as in Exercise 10-25, except that the book value of the press traded in is $185,000.
(a) What is the amount of cash given?
(b) What is the gain or loss on the exchange?
Answer:
a.
Price (fair market value) of new equipment ............................... $400,000
Trade-in allowance of old equipment ......................................... 175,000
Cash paid on the date of exchange ............................................ $225,000
b. Price (fair market value) of new equipment ...................... $400,000
Less assets given up in exchange:
Book value of old equipment................................ $185,000
Cash paid on the exchange.................................. 225,000 410,000
Loss on exchange of equipment...................................... $ 10,000
