Can't figure exchanges out...

Discussion in 'Accounting' started by hi, Nov 15, 2003.

  1. hi

    hi Guest

    Liberty Corp owns a machine that orignally cost $200,000 upon which there is
    depreciation of $140,000.

    C. The machine is given for a new machine that fulfills the same function
    and cash of $40,000 is received The fair value of the new machine is
    $70,000.

    -i'm stuck. How do you compute whether you have a gain or a loss on the
    transaction? So far I have:

    Cash Dr
    New Machine Dr
    Acc. Depr. Dr 140,000
    Old Asset Dr.

    The book states some stuff about fair value consideration (given) = fair
    value consideration (received), but how does that apply to this example?
    What's the fair value of the machine we're giving up? $200,000 or $60,000?

    fair value given = 200,000 (the cost?)
    fair value received = 40,000 cash + 70,000 fair value machine

    I'm stuck and have a brain lapse... someone please help me out.



    --
     
    hi, Nov 15, 2003
    #1
    1. Advertisements

  2. hi

    Janice Davis Guest

    And here is what I got--Janice
    Cash Dr $40,000 <== Liberty received cash
    New Machine Dr 70,000
    Acc. Depr. Dr 140,000
    Old Asset Cr. $200,000
    Gain on disp 50,000
     
    Janice Davis, Nov 15, 2003
    #2
    1. Advertisements

  3. hi

    hi Guest

    correct. i just got that answer too. check my last post for info on how to
    figure it out when cash is less than 25% of the consideration received.
     
    hi, Nov 15, 2003
    #3
  4. For income tax purposes there is no gain or loss, at least in the US.

    Spindlegerger
     
    spindleberger, Nov 16, 2003
    #4
  5. hi

    Janice Davis Guest

    These questions are for financial accounting purposes. Hi and I are both
    taking Intermediate Fin Acc I this term. Thanks for the input though I will
    add it to my memory.

    Janice
     
    Janice Davis, Nov 16, 2003
    #5
    1. Advertisements

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.