A is corrent. The requirement is to determine the amount at which to record land acquired in exchange for a delivery truck. Per ASC Topic 845, when the cash flows are significantly different, the transaction has commercial substance and is recorded at fair value. Both gains and losses are recognized in the exchange. The solutions approach is to prepare the journal entry to record the trade of the delivery truck for the land.| Land | 11,000 | | | Accumulated depreciation | 3,500 | | | Loss on exchange | 1,500 | | | Delivery truck | | 10,000 | | Cash | | 6,000 |
The loss on the exchange of the delivery truck for the land is $1,500 ($6,500 book value - $5,000 fair market value). The value assigned to the land is the fair value of the asset(s) given up (i.e., the delivery truck [$5,000] plus cash paid [$6,000], or $11,000).B is incorrect.The requirement is to determine the amount at which to record land acquired in exchange for a delivery truck. Per ASC Topic 845, when the cash flows are significantly different, the transaction has commercial substance and is recorded at fair value. Both gains and losses are recognized in the exchange. The solutions approach is to prepare the journal entry to record the trade of the delivery truck for the land.| Land | 11,000 | | | Accumulated depreciation | 3,500 | | | Loss on exchange | 1,500 | | | Delivery truck | | 10,000 | | Cash | | 6,000 |
The loss on the exchange of the delivery truck for the land is $1,500 ($6,500 book value - $5,000 fair market value). The value assigned to the land is the fair value of the asset(s) given up (i.e., the delivery truck [$5,000] plus cash paid [$6,000], or $11,000).C is incorrect. The requirement is to determine the amount at which to record land acquired in exchange for a delivery truck. Per ASC Topic 845, when the cash flows are significantly different, the transaction has commercial substance and is recorded at fair value. Both gains and losses are recognized in the exchange. The solutions approach is to prepare the journal entry to record the trade of the delivery truck for the land.| Land | 11,000 | | | Accumulated depreciation | 3,500 | | | Loss on exchange | 1,500 | | | Delivery truck | | 10,000 | | Cash | | 6,000 |
The loss on the exchange of the delivery truck for the land is $1,500 ($6,500 book value - $5,000 fair market value). The value assigned to the land is the fair value of the asset(s) given up (i.e., the delivery truck [$5,000] plus cash paid [$6,000], or $11,000).D is incorrect. The requirement is to determine the amount at which to record land acquired in exchange for a delivery truck. Per ASC Topic 845, when the cash flows are significantly different, the transaction has commercial substance and is recorded at fair value. Both gains and losses are recognized in the exchange. The solutions approach is to prepare the journal entry to record the trade of the delivery truck for the land.| Land | 11,000 | | | Accumulated depreciation | 3,500 | | | Loss on exchange | 1,500 | | | Delivery truck | | 10,000 | | Cash | | 6,000 |
The loss on the exchange of the delivery truck for the land is $1,500 ($6,500 book value - $5,000 fair market value). The value assigned to the land is the fair value of the asset(s) given up (i.e., the delivery truck [$5,000] plus cash paid [$6,000], or $11,000). |
