Ashton Company exchanged a nonmonetary asset with a cost of $30,000 and accumulated depreciation of $16,000 for another nonmonetary asset worth $12,000. Ashton also received $1,400 cash. In the entry to record this exchange, Ashton should record a:
Ascertain the amount of gain or loss recorded for the non-monetary asset exchanged.
Nonmonetary exchange:
Nonmonetary exchange is a reciprocal transfer among a company and another organization wherein, the company obtains nonmonetary assets or services by surrendering other “nonmonetary assets or services”.
Justification for the incorrect option a, b and c:
$2,000 gain, $2,000 loss, and $600 gain is not recorded in the entry for this non-monetary exchange. Therefore, these are incorrect options.
Justification for the correct option d:
Calculate the amount of gain (loss) on exchange:
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