Question

1.Equipment that cost $674000 and has accumulated depreciation of $292000 is exchanged for equipment with a fair value of $480000 and $120000 cash is received. The exchange lacked commercial substance. The gain to be recognized from the exchange is

a.$188000

b.$52400

c.$90000

d.$278000

2. Crane Company has equipment with a carrying amount of $2400000. The expected future net cash flows from the equipment are $2440000, and its fair value is $2035000. The equipment is expected to be used in operations in the future. What amount (if any) should Crane report as an impairment to its equipment?

a

$365000.

b

$40000.

c

$405000.

d	No impairment should be reported

3. A schedule of machinery owned by Concord Corporation is presented below:

			Estimated		Estimated
	Total Cost		Salvage Value		Life in Years
Machine X	$591000		$38000		14
Machine Y	805000		82000		10
Machine Z	292000		58000		6

Concord computes depreciation by the composite method.

The composite rate of depreciation (in percent) for these assets is

a

8.36.

b

8.93.

c

13.79.

d

10.36.

Answer 1

☺ The gain to be recognized - $ 52,400 (if value very) According to the impormation provided by you -- cost $ 674,000 lesso accumulated depreciation $ 292,000 Book value $ 382,000 fair value $ 600,000 [$ 480poo +$ 120,000 Gain $218,000 gain to be recognized = $218,000 y $120,000 $600,000 = $43,600] carrying amt of equipment - $2,400,000 Expected future net cash flow - $ 2,440,000 Since the expected future net cash flow is greater than carrying amount, no impairment should be reported 6 Asset life machine * machine y machine z orginal cost $ 591,000 $ 805,000 $292,000 salvage ме $38,000 $82,000 $58,000 14 10 6 Depreciation per year $ 34,500 $ 72300 $ 39,000 $ 16,88,000 $ 150,800 tee $150,800 $150,800 = 18.937 $ 46 88000 composite rate = (in %) 6] 8.937