Question

[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 $17,000 (original cost of $38,000 less accumulated depreciation of $21,000) and a fair value of $10,000. Kapono paid $30,000 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 $550,000 and a fair value of $800,000. Kapono paid $60,000 cash to complete the exchange. The exchange has commercial substance.

rev: 06_22_2019_QC_CS-171508

Required:
1.What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor?

What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor?

	Initial value of new tractor

Answer 1

1)
Loss on exchange of tractor
	Cost Of Old Tractor			$         38,000
	Less: Acc. Depreciation Of Old Tractor			$         21,000
	Book Value Of Tractor Old Tractor			$         17,000
	Less: Fair Value			$         10,000
	Loss On Exhange			$           7,000
Initial value of new tactor
	Fair Value of tractor given			$         10,000
	Add: Cash Paid			$         30,000
	Initial value of new tractor			$         40,000