C is corrent. Per ASC Topic 845, when a nonmonetory exchange transaction does not result in a significant difference in cash flows, the book value is used to record the transaction. However, when the exchange of nonmonetary assets includes an amount of monetary consideration, the receiver of monetary consideration has realized a partial gain on the exchange. To determine the partial gain to be recognized, first compute the total gain which is the difference between the fair market value of the nonmonetary asset given up and its book value. Then multiply the ratio of the monetary consideration received to the total consideration received (i.e., monetary consideration plus the estimated fair market value of the asset received) times the total gain. The result is the realized gain to be recognized. The entity paying the monetary consideration should not recognize any gain. Note, however, that all losses on sales or exchanges are recognized immediately.
A is incorrect. Per ASC Topic 845, when a nonmonetory exchange transaction does not result in a significant difference in cash flows, the book value is used to record the transaction. However, when the exchange of nonmonetary assets includes an amount of monetary consideration, the receiver of monetary consideration has realized a partial gain on the exchange. To determine the partial gain to be recognized, first compute the total gain which is the difference between the fair market value of the nonmonetary asset given up and its book value. Then multiply the ratio of the monetary consideration received to the total consideration received (i.e., monetary consideration plus the estimated fair market value of the asset received) times the total gain. The result is the realized gain to be recognized. The entity paying the monetary consideration should not recognize any gain. Note, however, that all losses on sales or exchanges are recognized immediately.
B is incorrect. Per ASC Topic 845, when a nonmonetory exchange transaction does not result in a significant difference in cash flows, the book value is used to record the transaction. However, when the exchange of nonmonetary assets includes an amount of monetary consideration, the receiver of monetary consideration has realized a partial gain on the exchange. To determine the partial gain to be recognized, first compute the total gain which is the difference between the fair market value of the nonmonetary asset given up and its book value. Then multiply the ratio of the monetary consideration received to the total consideration received (i.e., monetary consideration plus the estimated fair market value of the asset received) times the total gain. The result is the realized gain to be recognized. The entity paying the monetary consideration should not recognize any gain. Note, however, that all losses on sales or exchanges are recognized immediately.
D is incorrect. Per ASC Topic 845, when a nonmonetory exchange transaction does not result in a significant difference in cash flows, the book value is used to record the transaction. However, when the exchange of nonmonetary assets includes an amount of monetary consideration, the receiver of monetary consideration has realized a partial gain on the exchange. To determine the partial gain to be recognized, first compute the total gain which is the difference between the fair market value of the nonmonetary asset given up and its book value. Then multiply the ratio of the monetary consideration received to the total consideration received (i.e., monetary consideration plus the estimated fair market value of the asset received) times the total gain. The result is the realized gain to be recognized. The entity paying the monetary consideration should not recognize any gain. Note, however, that all losses on sales or exchanges are recognized immediately.
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