Question
In: Accounting
The Elcorn Company traded a tract of land to Sanchez Development for a similar tract of...
The Elcorn Company traded a tract of land to Sanchez Development for a similar tract of land. The old land had a book value of $2,500,000 and a fair value of $4,500,000. To equalize the fair values of the assets exchanged, in addition to the land, Elcorn paid Sanchez $500,000 in cash. This means that the fair value of the land acquired is $5,000,000.
My teacher has informed me that there is no commercial substance in this problem. If it lacks commercial substance :
No cash received = No gain.
Gain = (Fair value given - BV given) * (cash received / total Fair value received).
Loss = BV given - Fair value given.
Can you please explain to me the journal entry from Sanchez Developments' point of view?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Bogart Development purchased a tract of land on August 31 of the current year, paying $225,000....
Bogart Development purchased a tract of land on August 31 of the
current year, paying $225,000. Prior to the sale, the seller paid
property taxes of $18,000 on the property. The taxes covered the
calendar year period January 1 through December 31. What will be
Bogart’s tax basis in the land?
Parker Piano Company purchases a tract of land and an existing building for $1,000,000. The company...
Parker Piano Company purchases a tract of land and an existing
building for $1,000,000. The company plans to remove the old
building and construct a new restaurant on the site. In addition to
the purchase price, Parker pays closing costs, including title
insurance of $3,000. The company also pays $14,000 in property
taxes, which includes $9,000 of back taxes (unpaid taxes from
previous years) paid by Parker on behalf of the seller and $5,000
due for the current fiscal year...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $8 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $4
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $8 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $4
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $8 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $4
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $8 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $4
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $13 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $6.5
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $8 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $4
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
The Bush Oil Company is deciding whether to drill for oil on a tract of land...
The Bush Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates that the
project will cost $6 million today. Bush estimates that once
drilled, the oil will generate positive cash flows of $3.9 million
a year at the end of each of the next 4 years. Although the company
is fairly confident about its cash flow forecast, it recognizes
that if it waits 2 years, it will have...
The Karns Oil Company is deciding whether to drill for oil on a tract of land...
The Karns Oil Company is deciding whether to drill for oil on a
tract of land that the company owns. The company estimates the
project would cost $12 million today. Karns estimates that, once
drilled, the oil will generate positive net cash flows of $5.52
million a year at the end of each of the next 4 years. Although the
company is fairly confident about its cash flow forecast, in 2
years it will have more information about the local...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
- There are a large number of tasks involved in information technology and programming, and many of...
- Using one quantitative and one qualitative health policy research method described in this chapter, design a...
- What is the Rawls' solution to the age-old question of social (economic / distributive) justice?...
ADVERTISEMENT