Question

Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment given up were $40,000 (original cost of $95,000 less accumulated depreciation of $55,000) and $27,000, respectively. Assume Calaveras paid $9,000 in cash and the exchange has commercial substance. (1) At what amount will Calaveras value the pickup trucks

Answer 1

Answer:

$36,000

Explanation:

Given that,

Book value of the equipment given up = $40,000

Fair value of the equipment given up = $27,000

Cash paid = $9,000

Hence,

Value of pickup trucks:

=  Fair value of the equipment given up + Cash paid

=  $27,000 + $9,000

= $36,000

Therefore, the amount of $6,000 will Calaveras value the pickup trucks.