Question

Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,500 (original cost of $29,000 less accumulated depreciation of $16,500) and a fair value of $9,100. Kapono paid $21,000 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 $505,000 and a fair value of $710,000. Kapono paid $51,000 cash to complete the exchange. The exchange has commercial substance.

rev: 06_22_2019_QC_CS-171

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 $15,000 instead of $9,100. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?

Answer 1

Answer: Summoroized the data and information given in the cases provided in the question; Kapono fooms exchanged and old ---- ④. Book value of tractor -$12,500. value received in exchange = $9,100 Loss on exchange - $12,500 - $9,100 $3,400 Initial value of new factor= Exchange vale 7 구 Cash $9,100 + $ 21,000 $30, 100 ③ Book value of tractor = $12,500 value received in exchange - $15,000 profit on exchange=15,000 - $12,500 $2,500 Initial value of new tracter= Exchange & Cash paid $15,000 + $91,000 $36,000. paid value please -please kindly Up-vote.