Question Details

The gain to be recorded on the exchange is 



Use the following information for questions 1 and 2.
A machine cost $120,000, has annual depreciation of $20,000, and has accumulated depreciation of $90,000 on December 31, 2010. On April 1, 2011, when the machine has a fair value of $27,500, it is exchanged for a machine with a fair value of $135,000 and the proper amount of cash is paid. The exchange has commercial substance.

1.	The gain to be recorded on the exchange is 
a.	$0.
b.	$2,500.
c.	$5,000.
d.	$15,000.
	2.	The new machine should be recorded at
a.	$107,500.
b.	$122,500.
c.	$132,500.
d.	$135,000.

Use the following information for questions 3 and 4.

Equipment that cost $81,000 and has accumulated depreciation of $30,000 is exchanged for equipment with a fair value of $48,000 and $12,000 cash is received. The exchange has commercial substance.

	3.	The gain to be recognized from the exchange is
a.	$9,000 gain.
b.	$6,000 gain.
c.	$12,000 gain.
d.	$21,000 gain.

	4.	The new equipment should be recorded at
a.	$28,800.
b.	$51,000.
c.	$30,000.
d.	$48,000.




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