Question

Beerbo Inc. traded a used truck for a small computer. Before this exchange of non-monetary assets (ENMA), Beerbo's balance sheet show the used truck at a cost of $20,000 with an accumulated depreciation balance of $18,000. The fair value of the small computer was $3,300. Beerbo also paid $500 in the transaction.

Assume the ENMA had commercial substance.

What is the total fair value given by Beerbo in this transaction?

What is the total fair value received by Beerbo in this transaction?

How much must Beerbo record as the cost of the small computer received?

How much gain (loss) must Beerbo record from in this transaction? Input gains as positive numbers, losses as negative numbers (gains = 123; losses = -123).

Answer 1

What is the total fair value given by Beerbo in this transaction?
Original cost	$          20,000
Less: Accumulated depreciation (to date of exchange)	$          18,000
Book value of assets	$            2,000
Add: cash paid by Beerbo	$                500
Total fair value given by Beerbo	$            2,500
What is the total fair value received by Beerbo in this transaction?
Fair value of the small computer	$            3,300
Total fair value received by Beerbo	$            3,300
How much must Beerbo record as the cost of the small computer received?
Fair value of the small computer	$            3,300
Cost of the small computer received	$            3,300
How much gain (loss) must Beerbo record from in this transaction?
Total fair value received by Beerbo	$            3,300
Less: Total fair value given by Beerbo	$            2,500
Gain (Loss) on exchange	$                800

Beerbo Company
Account Titles and Explanation	Debit	Credit
Equipment (small computer)	$                3,300
Accumulated Depreciation	$             18,000
Gain on Disposal of equipment		$                       800
Cash		$                       500
Equipment (truck)		$                 20,000
(To record the exchange of asset.)