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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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Nabokov Company exchanges assets with Faulkner Company. Nabokov exchanges equipment with a book value of $25,000 and fair market value of $40,000 for Faulkner’s land with a cost of $7,500 and fair market value of $38,000. Faulkner also paid Nabokov $2,000 in cash. Compute Nabokov’s cost of the land acquired and any gain or loss on the exchange.

To determine

Calculate the cost of land acquired and any gain or loss on the exchange.

Explanation

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

Calculate the cost of land acquired:

Costoflandacquired=FairvalueofassetsurrenderedCashreceived=$40,000$2,000=$38,000

Therefore, the cost of land acquired is $38,000

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