Beerbo Inc. traded a used truck for a small computer. Before this exchange of non-monetary assets...

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 $30,000 with an accumulated depreciation balance of $27,000. The fair value of the small computer was $37,000. Beerbo also paid $36,000 in the transaction.

Assume the ENMA lacks 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 truck received?

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

Expert Solution

In case of transaction of ENMA where, it lacks commercial substance Asset is booked by the party paying the boot amount ( any cash amount) is at cost of asset given plus such boot amount. Such company would not record any profit of such transfer. But if there is loss same needs to be accounted for.

Fair value of Asset given : Old truck : 3000

Cash : 36000

Total : 39000

Fair value of asser received: Small computer : 37000.

	Profit/ - loss on exchange
	Fair value of small computer	37000

Less	Cost of old truck	3000
	(30000-27000)
	Cash given	36000

	Gain / -loss	-2000

Asset will be booked at fair value of asset received .ie of small computer $ 37000

Joutnal entry

Accoout name	Debit	Credit
Small computer	37000
Accumulated dep. on old truck	27000
Loss on exchange of asset	2000
Old truck Asset		30000
Cash		36000
( to record exchange of asset)

ekkarill92 answered 1 year ago

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Beerbo Inc. traded a used truck for a small computer. Before this exchange of non-monetary assets...

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