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(Solution Download) Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of


 

 

 

 

 

 

 

Case A. Kapono Farms exchanged an old tractor

 

for a newer model. The old tractor had a book value of $17,500

 

(original cost of $39,000 less accumulated depreciation of $21,500)

 

and a fair value of $10,100. Kapono paid $31,000 cash to complete

 

the exchange. The exchange has commercial substance.

 

 

 

 

 

 

 

 

 

Required:

 

 

 

 

 

 

 

 

 

 

 

 

1.1

 

What is the amount of gain or loss that Kapono would recognize

 

on the exchange?

 

  

 

        

 

 

 

 

 

 

 

 

 

 

 

 

1.2

 

What is the initial value of the new tractor?

 

  

 

        

 

 

 

 

 

 

 

Assume the fair

 

value of the old tractor is $25,000 instead of $10,100.

 

 

 

 

 

 

 

 

 

 

 

 

2.1

 

What is the amount of gain or loss that Kapono would recognize

 

on the exchange?

 

  

 

        

 

 

 

 

 

 

 

 

 

 

 

 

2.2What is the initial value of the

 

new tractor?

  

 

        

 

 

 

 

 

 

 

 

Case B. Kapono Farms exchanged 100 acres of

 

farmland for similar land. The farmland given had a book value of

 

$555,000 and a fair value of $810,000. Kapono paid $61,000 cash to

 

complete the exchange. The exchange has commercial substance.

 

 

 

 

 

 

 

 

 

Required:

 

 

 

 

 

 

 

 

 

 

 

 

1.1

 

What is the amount of gain or loss that Kapono would recognize

 

on the exchange?

 

  

 

        

 

 

 

 

 

 

 

 

 

 

 

 

1.2What is the initial value of the

 

new land?

  

 

        

 

 

 

 

 

 

 

Assume the fair

 

value of the farmland given is $444,000 instead of $810,000.

 

 

 

 

 

 

 

 

 

 

 

 

2.1

 

What is the amount of gain or loss that Kapono would recognize

 

on the exchange?

 

  

 

       

 

 

 

 

 

 

 

 

 

 

 

 

2.2What is the initial value of the

 

new land?

  

 

       

 

 

 

 

 

 

 

Repeat requirement 1

 

of case B, assuming that the exchange lacked commercial

 

substance.

 

 

 

 

 

 

 

 

 

 

 

 

3.1

 

What is the amount of gain or loss that Kapono would recognize

 

on the exchange?

 

  

 

        

 

 

 

 

 

 

 

 

 

 

 

 

3.2What is the initial value of the

 

new land?

  

 

       

 


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