Karlene Company and Erika Company are fuel oil disti ers. To facilitate the delivery of oil to customers, the two entities exchanged ownership of barrels of oil without physically moving the oil. Karlene paid Erika P1,500,000 to compensate for a difference in the grade of oil. It was reliably determined that the configuration of the cash flows of the asset received does not differ from the configuration of the cash flows of the asset transferred. On the date of exchange, the oil inventory of Karlene has a carrying amount of P5,000,000 and fair value of P7,000,000. The oil inventory of Erika has a carrying amount of P6,000,000 and fair value of P8,500,000. What amount should Karlene record as cost of the oil inventory receive in exchange? A. 4,500,000 B. 6,500,000 7000 000

Karlene Company and Erika Company are fuel oil disti ers. To facilitate the delivery of oil to customers, the two entities exchanged ownership of barrels of oil without physically moving the oil. Karlene paid Erika P1,500,000 to compensate for a difference in the grade of oil. It was reliably determined that the configuration of the cash flows of the asset received does not differ from the configuration of the cash flows of the asset transferred. On the date of exchange, the oil inventory of Karlene has a carrying amount of P5,000,000 and fair value of P7,000,000. The oil inventory of Erika has a carrying amount of P6,000,000 and fair value of P8,500,000. What amount should Karlene record as cost of the oil inventory receive in exchange? A. 4,500,000 B. 6,500,000 7000 000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will A) effectively reduce the amount to be recorded as the cost of the new asset. B) be credited directly to the owner's capital account. C) be reported in the Other Revenues and Gains section of the income statement. D) effectively increase the amount to be recorded as the cost of the new asset.
Alvarez and Reymond, both NGAs, exchanged their equipment. Relevant data is presented below Alvarez Reymond Carrying amount 85,000 130,000 Fair value 95,000 115,000 Cash paid by Alvarez to Reymond 15,000 How much is the initial measurement of the equipment received by Reymond if the exchange has a commercial substance? Refer to the previous question, how much is the gain (loss) recognized by Reymond?
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