Question

Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance?What is the gain to be recognized?

Answer 1

Answer:

$240,000          

Explanation:

The computation of the gain to be recognized is shown below:

= Total Exchange value - net value

where,

Total exchange value equals to

= Fair value of equipment + cash received

= $480,000 + $120,000

=$600,000

And, the net value would be

= Estimated cost - accumulated depreciation

= $660,000 - $300,000

= $360,000

ow put these values to the above formula

So, the value would be equal to

= $600,000 - $360,000

= $240,000