Question Details
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?
|
| 2.2 | What 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?
|
| 1.2 | What 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?
|
| 2.2 | What 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?
|
| 3.2 | What is the initial value of the
new land? |
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DATE ANSWEREDDec 08, 2020
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