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.

Answers

im going to come back to you?

by knowing conditionality

explanation:

Gain on Disposal 25,100

Explanation:

book value

cost- accumulated depreciation

387,400 - 312,900 = 74,500

trade-in:

          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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