1. J & J exchanged an asset with a book value of $10,000 and paid $1,000 in cash for a another asset from W & W Company with a book value of $10,300. The fair value of the given asset was $9,500 and the new asset was $10,500. Calculate the gain or loss to be recognized by J & J. Assume commercial substance.
$10,500
$9,500
$11,500
None of the above
2. Which of the following statements concerning exchanges of like kind assets without commercial substance is not true?
Always recognize losses
Gains are not recognized if cash is paid
Losses are recognized if cash is paid
Gains are never recognized
3. J & J trades an asset that had a book value of $18,000 for another asset with a fair market value of $20,000. Assume lack of commercial substance. J & J pays $500 in cash. J & J's asset has a fair market value of $19,500. J & J would record the cost of the new asset at?
$21,500
$18,500
$19,500
$20,000
4. A loss on the sale of an operating asset results if the proceeds from the sale
are less than the book value of the asset
exceed the book value of the asset
are less than the fair market value of the asset
exceed the fair market value of the asset
5. During periods of inflation which of the following will yield the highest cost of sales
average cost
LIFO
FIFO
Gross profit method