Question

Bloomington Inc. exchanged land for equipment and $2,600 in cash. The book value and the fair value of the land were $104,600 and $88,900, respectively. Bloomington would record equipment and a gain/(loss) of: Equipment Gain/(loss) Multiple Choice $86,300 $2,600. $104,600 $(2,600). $86,300 $(15,700). All of these answer choices are incorrect.

Answer 1

Bloomington will record $86,300 gain and loss of ($15,700)

Step-by-step explanation:

So first we state terms:

Cash= $2,600

Fair value of land= $88,900

Book value of land= $104,600

Since land was exchanged for cash and equipment

Land = Cash + Equipment

Land - Cash = Equipment

Note: When disposing of land it is done at the fair value price

$88,900 - $2,600 = Equipment

$86,300= Equipment

To get the loss on sale of the land= (Book value) - (Fair value)

Loss = 104,600 - 88,900

= $15,700

Thus Bloomington will record $86,300 gain and loss of ($15,700)

Answer 2

The answer is $86,300 $(15,700)

Step-by-step explanation:

The correct answer is:

Equipment would be equal to fair value minus the cash = $88,900 - $2,600= $86,300

Loss would be equal to fair value minus book value = $88,900 - $104,600=

($15,700)

So the record would be =

Land $104,600

Equipment $86,300

Cash $2,600

Loss $15,700