Question Details

Timmons Company traded machinery 


Use the following information for questions 1 through 2.

Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained:
			Hager's Land	Shaw's Land
		Cost and book value	$192,000	$120,000
		Fair value based upon appraisal	240,000	210,000

	The exchange was made, and based on the difference in appraised fair values, Shaw paid $30,000 to Hager. The exchange lacked commercial substance.

	1.	For financial reporting purposes, Hager should recognize a pre-tax gain on this exchange of
a.	$0.
b.	$6,000.
c.	$30,000.
d.	$48,000.

2.	The new land should be recorded on Hager's books at
a.	$168,000.
b.	$192,000.
c.	$210,000.
d.	$240,000.

	3.	The new land should be recorded on Shaw's books at
a.	$120,000.
b.	$150,000.
c.	$210,000.
d.	$240,000.

	4.	Timmons Company traded machinery with a book value of $120,000 and a fair value of $200,000. It received in exchange from Lewis Company a machine with a fair value of $180,000 and cash of $20,000. Lewis- machine has a book value of $190,000. What amount of gain should Timmons recognize on the exchange?
a.	$  -0-
b.	$8,000
c.	$20,000
d.	$80,000

	5.	Lewis Company traded machinery with a book value of $190,000 and a fair value of $180,000. It received in exchange from Timmons Company a machine with a fair value of $200,000. Lewis also paid cash of $20,000 in the exchange. Timmons- machine has a book value of $190,000. What amount of gain or loss should Lewis recognize on the exchange?
a.	$20,000 gain
b.	$  -0-.
c.	$1,000 loss
d.	$10,000 loss





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