Question

The cost of a non-monetary asset acquired in exchange for another non-monetary asset and the exchange has commercial substance is usually recorded at

a. the fair value of the asset given up, and a gain or loss is recognized.
b. the fair value of the asset given up, and a gain but not a loss may be recognized.
c. the fair value of the asset received if it is equally reliable as the fair value of the asset given up.
d. either the fair value of the asset given up or the asset received, whichever one results in the largest gain (smallest loss) to the company.

Answer 1

The cost of a non-monetary asset acquired in exchange for another non-monetary asset with commercial substance is usually recorded at the fair value of the asset given up, and a gain or loss is recognized.

Step-by-step explanation:

When a non-monetary asset is acquired in exchange for another non-monetary asset, and the exchange has commercial substance, the usual recording method is to use the fair value of the asset given up. In this case, a gain or loss is recognized based on the difference between the fair value of the asset given up and the fair value of the asset received. The answer to your question is option a. The fair value of the asset given up is recorded, and a gain or loss is recognized.