Question

Required information (The following information applies to the questions displayed below.) Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $17,500 (original cost of $39,000 less accumulated depreciation of $21,500) and a fair value of $10,100. Kapono paid $31,000 cash to complete the exchange. The exchange has commercial substance. Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $555,000 and a fair value of $810,000. Kapono paid $61,000 cash to complete the exchange. The exchange has commercial substance. Required: 1. What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor? 2. Assume the fair value of the old tractor is $25,000 instead of $10,100. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor? Initial value of new tractor Required 1 Required 2 >

Please do and explain both parts of the same question.

Answer 1

$ 10, 100 less: fair value of old Tracker = Cost of Truck $39,000 Accumulated Repreciation $21.500 $ 17,500 losson exchange of Tractor $7,400 Asset Initial value of New Tractor = fair value of old & cash given = $ 10,100 + $ 31,000 = $ 41,100

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Q.2 fair value of old less: Book value of Tractor Tractor = $ 25,000 = ($ 17,500) Gain on Exchange of Taactus - $ 7,500 Initial value of New Tractor = fair value of old Tractor'& Cash paid = $ 25,000 + $ 31,000 = $ 56,000 If any Asset is acquised thrugh exchange, then value of New Asset would be fair value of old asset given up and any exchange of cash. Therefore initial value of new Taactor is seconded $ 56,000