Nonmonetary exchange
Response to the following :
Refer to the situation described in problem 1. Answer the questions assuming that the exchange lacks commercial substance.
Problem 1:
Refer to the situation described in problem 2. Answer the questions assuming that the fair value of the equipment was $24,000, instead of $17,000.
Problem 2:
Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment were $20,000 (original cost of $65,000 less accumulated depreciation of $45,000) and $17,000, respectively. To equalize fair values, Calaveras paid $8,000 in cash. At what amount will Calaveras value the pickup trucks? How much gain or loss will the company recognize on the exchange? Assume the exchange has commercial substance.