, 26.12.2019iBrain

Equipment that cost \$387,400 and has accumulated depreciation of \$312,900 is exchanged for equipment with a fair value of \$160,000 and \$40,000 cash is received. the exchange lacked commercial substance. a) calculate the gain to be recognized from the exchange.

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by knowing conditionality

explanation:

Gain on Disposal 25,100

Explanation:

book value

cost- accumulated depreciation

387,400 - 312,900 = 74,500

equipment   160,000

cash                40,000

total               200,000

gain 200,000 - 74,500 =       125,500

As it lack commercial substance we recognize gain for the portion of cash received doing cross multiplication

200,00 --> generates 125,500 gain

40,000 --> generates X gain

40,000/200,000 x 125,500 = 25,100

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