A is corrent. The journal entry to record this transaction on the books of Slad is the following: | Assets (from Gil) | 140,000 | | | Assets (Slad) | | 40,000 | | Cash | | 100,000 |
When the transaction lacks commercial substance, book value is used to record the exchange. Thus, no gains may be recognized on the exchange, except for that portion relating to the cash (boot) received in the exchange. The acquired assets are recorded at the book value of the assets given up. In this case, the assets are recorded at $140,000 ($100,000 cash + $40,000 carrying amounts of Slad’s old assets). B is incorrect. The journal entry to record this transaction on the books of Slad is the following: | Assets (from Gil) | 140,000 | | | Assets (Slad) | | 40,000 | | Cash | | 100,000 |
When the transaction lacks commercial substance, book value is used to record the exchange. Thus, no gains may be recognized on the exchange, except for that portion relating to the cash (boot) received in the exchange. The acquired assets are recorded at the book value of the assets given up. In this case, the assets are recorded at $140,000 ($100,000 cash + $40,000 carrying amounts of Slad’s old assets). B is incorrect. The journal entry to record this transaction on the books of Slad is the following: | Assets (from Gil) | 140,000 | | | Assets (Slad) | | 40,000 | | Cash | | 100,000 |
When the transaction lacks commercial substance, book value is used to record the exchange. Thus, no gains may be recognized on the exchange, except for that portion relating to the cash (boot) received in the exchange. The acquired assets are recorded at the book value of the assets given up. In this case, the assets are recorded at $140,000 ($100,000 cash + $40,000 carrying amounts of Slad’s old assets). B is incorrect. The journal entry to record this transaction on the books of Slad is the following: | Assets (from Gil) | 140,000 | | | Assets (Slad) | | 40,000 | | Cash | | 100,000 |
When the transaction lacks commercial substance, book value is used to record the exchange. Thus, no gains may be recognized on the exchange, except for that portion relating to the cash (boot) received in the exchange. The acquired assets are recorded at the book value of the assets given up. In this case, the assets are recorded at $140,000 ($100,000 cash + $40,000 carrying amounts of Slad’s old assets). |
