Determining exchange lacked commercial substance

Assignment Help Accounting Basics
Reference no: EM13152936

A machine cost 120,000 has annual depreciation of 20,000 and has accumulated depreciation of 90,000 on December 31, 2006. On April 1, 2007 when the machine has a market value of 27,500, it is exchanged for a machine with a fair value of 135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.

A) The gain to be recorded on the exchange is what dollar amount?

B) The new machine should be recorded at what dollar amount?

Reference no: EM13152936

Questions Cloud

What advice can you offer mcburger : How much revenue does McBurger currently earn based on the information above and is McBurger maximizing its revenues
Key elements of the inventory costing method : 1. Discuss the key elements of the inventory costing method. 2. Discuss why it is appropriate to use this method.
What is the purpose of design of experiments : Our analysis table gives a p-value of 0.01 for Pressure -- all other effects have large pvalues -- larger than 0.25. What does this all mean?
Define temperature scale using the freezing point : Suppose you decide to define your own temperature scale using the freezing point (13 C ) and boiling point (360 C) of oleic acid, the main component of olive oil
Determining exchange lacked commercial substance : On April 1, 2007 when the machine has a market value of 27,500, it is exchanged for a machine with a fair value of 135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.
Determine the recovery period for the furniture : The expected salvage value of the furniture is $5,000 in 2015. Determine the recovery period for the furniture and its depreciation deductions over the recovery period.
Define frequency-dependent selection : Define frequency-dependent selection (1). Can it result in the stable coexistence of two or more alleles at the same locus over several generations (2)? If you answered yes, give an example and explain how the equilibrium is maintained; if you ans..
Based on the cost curves which is more likely in businesses : What is the difference between an economic profit and an accounting profit, give an example? 3. Discuss the difference between diseconomies of scale and diminishing returns. Based on the cost curves which is more likely in businesses?
What is the consolidated balance for land on balance sheet : The selling price was $83,000. There were no other transactions which affected the companies' land accounts during 2010. What is the consolidated balance for land on the 2011 balance sheet?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Problem relating to depreciation expense

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or l..

  Determining sale of the land realized

On November 8, 2003, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized?

  Diff between evidence in a legal case and evidence in audit

How do management's responsibilities and the auditors' responsibilities differ in terms of the financial statements presented?

  Calculate the estimated profit of first year of operation

You are considering opening a kiosk in themall that will sell customizable aprons. You need to borrow money fromt eh bank to get the business started and estimate that you will need approximately $20,000. Calculate the estimated profit of your comp..

  Accounting for bad debts

What amount of bad debts expense will Hamilton Company report if it uses the direct write-off method of accounting for bad debts?

  Lower of cost or market for ending inventory

Compute the lower of cost or market for ending inventory assuming Lopez applies the lower of cost or market rule to inventory as a whole. Must Lopez adjust the reported inventory value? Explain.

  Increase in the total stockholders equity

the common stock had a market value of $xx per share (the shares were originally issued at $xx per share). As a result of this exchange, Abel's total stockholders' equity will increase by ??

  What are some of the ways that financial information

The CEO of your company has requested that you prepare a written presentation to be given at the next board of directors meeting regarding the continuing impact that the information age has on financial accounting.

  Problem regarding compounded semiannually

If you need $11,500 in eight years how much would you have to put in an account now that pays annual interest of 10% compounded semiannually to obtain your goal?

  Calculation for the adjustments of net income

For the year ended on December 31, 2010, XYZ had net income of $90,000 and paid dividends of $40,000. Prepare the journal entries to record the result using EQUITY METHOD of accounting. Show your calculation for the adjustments of net income.

  Calculate roi for independent investments

Maria Chevas bought a GIC (guaranteed investment certificate) on June 1 for $3,200. The certificate reached maturity on December 1 (it was a six-month certificate). On December 1, she cashed in the certificate and received her original $3,200 back..

  Determining company payback period

A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4) and $6,000 (year 5). The payback period is..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd