A and B have an exchange with no commercial substance. The equipment given up by A has a historical cost of $750,000, accumulated depreciation of $426,000, and a fair value of $405,000.The equipment given up by B has a historical cost of $810,000, accumulated depreciation of $330,000, and a fair value of $513.000. A also gives B $108,000 in cash. Answer the questions below for A. Required Part 1: Is there a gain or loss on the asset that A is disposing of and how much is it? Part 2: At the date of the exchange, will the gain or loss be recognized by A? Why? Part 3: Prepare the journal entry to record the exchange for A.
A and B have an exchange with no commercial substance. The equipment given up by A has a historical cost of $750,000, accumulated depreciation of $426,000, and a fair value of $405,000.The equipment given up by B has a historical cost of $810,000, accumulated depreciation of $330,000, and a fair value of $513.000. A also gives B $108,000 in cash. Answer the questions below for A. Required Part 1: Is there a gain or loss on the asset that A is disposing of and how much is it? Part 2: At the date of the exchange, will the gain or loss be recognized by A? Why? Part 3: Prepare the journal entry to record the exchange for A.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![A and B have an exchange with no commercial substance. The equipment given up by A has a historical cost of $750,000,
accumulated depreciation of $426,000, and a fair value of $405,000.The equipment given up by B has a historical cost of
$810,000, accumulated depreciation of $330,000, and a fair value of $513.000. A also gives B $108,000 in cash. Answer the
questions below for A.
Required
Part 1: Is there a gain or loss on the asset that A is disposing of and how much is it?
Part 2: At the date of the exchange, will the gain or loss be recognized by A? Why?
Part 3: Prepare the journal entry to record the exchange for A.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc5e3c27f-8ad5-426d-8589-fb62238a4cf9%2F0091760c-8404-4490-a528-ec5beeef6d3e%2F96egxcc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A and B have an exchange with no commercial substance. The equipment given up by A has a historical cost of $750,000,
accumulated depreciation of $426,000, and a fair value of $405,000.The equipment given up by B has a historical cost of
$810,000, accumulated depreciation of $330,000, and a fair value of $513.000. A also gives B $108,000 in cash. Answer the
questions below for A.
Required
Part 1: Is there a gain or loss on the asset that A is disposing of and how much is it?
Part 2: At the date of the exchange, will the gain or loss be recognized by A? Why?
Part 3: Prepare the journal entry to record the exchange for A.
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