Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book valueof $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchangehas commercial substance.Required:1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value ofthe new land?2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.3. Repeat requirement 1 assuming that the exchange lacked commercial substance.
Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book valueof $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchangehas commercial substance.Required:1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value ofthe new land?2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.3. Repeat requirement 1 assuming that the exchange lacked commercial substance.
Chapter8: Depreciation And Sale Of Business Property
Section: Chapter Questions
Problem 19MCQ
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Question
Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value
of $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchange
has commercial substance.
Required:
1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of
the new land?
2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.
3. Repeat requirement 1 assuming that the exchange lacked commercial substance.
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ISBN:
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Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT