Nonmonetary Exchange Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange. Exchange has commercial substance: If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value. Exchange lacks commercial substance: If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset. To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

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Answer 1

Question

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

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Exercise 10-17 (Algo) Nonmonetary exchange [LO10-6] The Bronco Corporation exchanged land for equipment. The land had a book value of $122,000 and a fair value of $154,000. Bronco received $12,000 from the owner of the equipment to complete the exchange which has commercial substance. Required: 1. What is the fair value of the equipment? 2. Prepare the journal entry to record the exchange. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the fair value of the equipment? Fair value 2$ 3,400 X Required 2 >

Testbank Multiple Choice Question 94 Sheffield Inc. and Pharoah Co. have an exchange with no commercial substance. The asset given up by Sheffield Inc. has a book value of $55000 and a fair value of $90000. The asset given up by Pharoah Co. has a book value of $120000 and a fair value of $105000. Boot of $25000 is received by Pharoah Co. What amount should Sheffield Inc. record for the asset received? O $105000 O $80000 O $120000 O $90000

Exercise 10-17 (Algo) Nonmonetary exchange [LO10-6] The Bronco Corporation exchanged land for equipment. The land had a book value of $131,000 and a fair value of $172,000. Bronco received $21,000 from the owner of the equipment to complete the exchange which has commercial substance. Required: 1. What is the fair value of the equipment? 2. Prepare the journal entry to record the exchange. Required 1 Required 2 Complete this question by entering your answers in the tabs below. Prepare the journal entry to record the exchange. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 X Answer is not complete. Transaction 1 Equipment - new Land-old General Journal Cash Gain on exchange of assets < Required 1 Required 2 <*** Debit 193,000 X Credit 131,000 X 21,000 X 41,000

Answer 2

Question

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

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Answer 3

Question

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

Expert Solution & Answer

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Answer 4

Question

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

Expert Solution & Answer

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See solution

Answer 5

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

Answer 6

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Answer 7

Chapter 10, Problem 10.8P

Case A (Requirement (1))

To determine

Nonmonetary Exchange

Exchange of non-monetary assets for another non-monetary asset is known as nonmonetary exchange.

Exchange has commercial substance:

If an exchange (Example: exchange of land for another non-monetary asset other than land) is likely to have a change in the future cash flows, then it is known as exchange has commercial substance. In this case, an exchange of non-monetary assets, which have commercial substance, is recorded at its fair value, and then resulted gain or loss must be recognized by determining the difference between the fair value and book value.

Exchange lacks commercial substance:

If an exchange (Example: exchange of land for another land) is expected that it will not change the future cash flows, then such exchange is known as exchange lacks commercial substance. In this case, an exchange lacks commercial substance; therefore new non-monetary asset would be value at the book value of the old non-monetary asset.

To determine: The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor.

Answer 8

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Answer 9

Case A Requirement (2)

To determine

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

Answer 10

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Answer 11

Case B (Requirement (1))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

Answer 12

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Answer 13

Case B (Requirement (2))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

Answer 14

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

Answer 15

Case B (Requirement (3))

To determine

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 10 - Prob. 10.1Q Ch. 10 - Prob. 10.2Q Ch. 10 - Prob. 10.3Q Ch. 10 - Prob. 10.4Q Ch. 10 - Prob. 10.5Q Ch. 10 - Prob. 10.6Q Ch. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9Q Ch. 10 - What account is credited when a company receives...

The amount of gain or loss that K Farms would recognize on the exchange of tracker, and also determine the initial value of the new tractor (Assume, the fair value of the old tractor is $14,000).

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the new land.

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the fair value of the old land is $400,000).

The amount of gain or loss that K Farms would recognize on the exchange of land, and also determine the initial value of the land (Assume that the exchange lacks commercial substance).

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