the following information relates to an exchange of assets by Wharton Company. The exchange lacks commercial...

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the following information relates to an exchange of assets by Wharton Company. The exchange lacks commercial...

the following information relates to an exchange of assets by Wharton Company. The exchange lacks commercial substance.

Old Equipment

Book Value Fair Value Cash Paid

Case I $75,000 $85,000 $15,000

Case II $50,000 $45,000 . $7,000

For Case I, Wharton records the equipment at $---------on its books and reports a gain or (loss) of $ --------on the exchange.

business accounting

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Answer 1

Answer #1

Answer

For Case 1(exchange lacks commercial substance.)

Record Equipment at $90000 ; Record a gain (loss) of 0

Explanation : Since FV > than BV ,thus Cost of Equipment = $75000+$15,000 = $ 90,000. The gain is not to be recorded.

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