Question

Two independent companies, Waterway Co. and Carla Vista 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:

		Waterway's Land		Carla Vista's Land
Cost and book value		$573300		$272700
Fair value based upon appraisal		720000		626400

The exchange was made, and based on the difference in appraised fair values, Carla Vista paid $93600 to Waterway. The exchange lacked commercial substance.

For financial reporting purposes, Waterway should recognize a pre-tax gain on this exchange of

$146700.

$19071.

$0.

$93600.

Answer 1

Solutions Given data, writer way's land | Carla vista's land cost and book value 1$ 573300 $ 272700 fair value besed upon appraisal | $720000 15626UCO . and Carla vista paid $93600 to waterway. Pored gaina 720000 --573300 = $ 146700 Because the exchange lacks commercial Substance some cash was received a position of gain is recognize - 93600 2012 "720000 pre- tax gain is The amount of z 146700 20:13 = $ 19071 B is correct option