Case A (Requirement (1))
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
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)
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))
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))
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))
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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INT. ACCOUNTING<CUSTOM>W/CONNECT 2-YEA
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