Reference no: EM132686716
You have a client that is considering trading machinery with another company. Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance. Your client would prefer that the exchange be deemed to have commercial substance. Here are the facts:
Round Company Square Company
Original Cost $100,000 $150,000
Accumulated Depreciation 45,000 80,000
Fair Value 80,000 120,000
Cash received (paid) (40,000) 40,000
Requirements:
Problem 1: Make memo to Nash Sheen, the controller of Round Company (your client) indicating and explaining the dollar impact on the financial statements of treating the exchange as having, versus lacking, commercial substance. This memo should be short and to the point; however, you should support any numbers you use (other than the given set of numbers) with calculation
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