77.2k views
5 votes
Pensacola Inc. exchanged old equipment for new equipment in two exchange transactions. Each transaction has commercial substance.

Old Equipment Cash
Book Value Fair Value Received
Equipment A $ 74,000 $ 81,300 $ 11,300
Equipment B $ 61,600 $ 54,800 $ 10,300
For Equipment B, Pensacola would record a gain/(loss) of:________.
a. $5,300
b. $(6,800)
c. $(7,800)
d. none of these answer choices are correct

User Unistudent
by
8.2k points

1 Answer

3 votes

Answer:

b. $(6,800)

Step-by-step explanation:

The computation of the gain or loss for the equipment B is shown below:

= Fair value - book value

where,

Fair value = $54,800

And, the book value = $61,600

Now placing these values to the above formula

So, the gain or loss i.e. to be recorded is

= $54,800 - $61,600

= $6,800 loss

as the fair value is less than the book value so the loss of $6,800 should be recorded

User Kissiel
by
7.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories