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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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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:

  1. a. $2,000 gain
  2. b. $2,000 loss
  3. c. $600 gain
  4. d. $600 loss

To determine

Ascertain the amount of gain or loss recorded for the non-monetary asset exchanged.

Explanation

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:

GainorLossonexchange=[Costofotherassetacquired(Fairvalueofassetsurrendered

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