Book value is the asset value shown in the balance sheet.,but the Midwest chicken sold out the truck to china Inn .,so we should consider the fair value which is the market value of the Truck
Step-by-step explanation:
Equipment cost
Sale value of the truck+ $9000 (given by China Inn)
= $31,000 + $9000 = $40,000
$40,000 should be the record value of the Equipment bought by the Midwest Chicken
Effects on the Exchange
Truck book value - Sales value
= $32,600 - $31,000 = $1,600 (loss on sale)
Midwest Chicken recognize a loss amounted to $1,600 on this exchange