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Pharoah Company traded machinery with a book value of $480,000 and a fair value of $1,070,000....

Pharoah Company traded machinery with a book value of $480,000 and a fair value of $1,070,000. It received in exchange from Waterway Industries a machine with a fair value of $963,000 and cash of $107,000. Waterway’s machine has a book value of $1,016,500. What amount of gain should Pharoah recognize on the exchange (assuming lack of commercial substance)?

**Please show all work**

The correct answer is $59,000 but not sure how to get it.

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Answer #1

Gain to be recognized

= [107,000/(963,000+107,000)] * (1,070,000-480,000)

= (107,000/1,070,000)*590,000

= 59,000

please give me positive rating







answered by: mahak
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