# More exchanges... H...

H

#### hi

How does this one look?

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

The machine and cash of \$80,000 are given for a new machine that fulfills
the same function and has a fair value of \$120,000.

Loss Dr. 20,000
New Machine Dr. 120,000
Acc. Deprec Dr 140,000
Old Machine Cr. 200,000
Cash Cr. 80,000
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H

#### hi

Is this correct for the problem?

Cash Dr. \$40,000
New Machine Dr. \$70,000
Acc. Depr. Dr. \$140,000
Old Machine Cr. \$200,000
Gain Cr. \$50,000

Explanation: The assets exchanged are similar. The FMV of the exchanged
asset (70,000) is greater than the book value of our asset (60,000).
Therefore a gain is recognized. The cash received is 25% or more of the
total consideration, therefore you must treat the transaction as a monetary
transaction. Record the acquired asset at the fair value (70,000) and
recognize the gain (50,000).

J

#### Janice Davis

Janice

hi said:
Is this correct for the problem?

Cash Dr. \$40,000
New Machine Dr. \$70,000
Acc. Depr. Dr. \$140,000
Old Machine Cr. \$200,000
Gain Cr. \$50,000

Explanation: The assets exchanged are similar. The FMV of the exchanged
asset (70,000) is greater than the book value of our asset (60,000).
Therefore a gain is recognized. The cash received is 25% or more of the
total consideration, therefore you must treat the transaction as a monetary
transaction. Record the acquired asset at the fair value (70,000) and
recognize the gain (50,000).