Question

A company exchanged land and cash of $4,500 for similar land. The book value and the fair value of the land were $89,800 and $101,500, respectively. Assuming that the exchange has commercial substance, the company would record land-new and a gain/(loss) of: Land Gain/(loss) a.$106,000 $0 b.$106,000 $11,700 c.$94,300 $0 d.$94,300 $11,700

Answer 1

Answer:

b.$106,000 $11,700

Explanation:

Given that

Fair value = $101,500

Land and cash = $4,500

Book value = $89,800

The computation of record land-new and a gain/(loss) is shown below:-

Record Land New = Fair Value + Land and cash

= $101,500 + $4,500

= $106,000

Gain (loss) = Fair Value - Book value

= $101,500 - $89,800

= $11,700

Therefore the record of land new is $106,000 and gain is $11,700