Question

Alamos Co. exchanged equipment and $18,200 cash for similar equipment. The book value and the fair value of the old equipment were $81,100 and $91,900, respectively. Assuming that the exchange lacks commercial substance, Alamos would record a gain/(loss) of:

Answer 1

Answer:

$0

Explanation:

Alamos Co. exchanged equipments and $18,200 cash for a similar equipment

The book value of the old equipment is $81,100

The fair value of the old equipment is $91,900

The gain/loss recorded by Alamos can be calculated as follows

= Fair value-book value

= $91,900-$81,100

= $10,800

= $10,800

But since the exchange lacks a commercial substance then, no amount of gain or loss will be recognized/recorded.

Hence Alamos Corporation recorded a gain of $0