[SaveBandit]

Who is the guru on this? I really struggle with this topic. The way you value a new asset seems entirely arbitrary depending on the fact pattern.

Scott Co. exchanged similar nonmonetary assets with Dale Co. and no cash was exchanged. The

carrying

amount of the asset surrendered by Scott exceeded both the fair value of the asset received and

Dale’s carrying amount of that asset. Scott should:

a. Recognize the difference between the carrying amount of the asset it surrendered and the fair

value of the asset it surrendered as a loss.

b. Recognize the difference between the carrying amount of the asset it surrendered and the fair

value of

the asset it received as a gain.

c. Recognize the difference between the carrying amount of the asset it surrendered and the

carrying amount of the asset it received as a loss.

d. Recognize no gain or loss.

Answer B.

I thought in a nonmonetary exchange you record the asset received as the carrying value of the asset given up. In this example, it would be recognized at FV. How do you know when to use FV and when to use BV? I guess if it’s a loss you use FV?

AUD - 94
BEC - 86
FAR - 85
REG - 90

If you pray enough, you can turn yourself into a cat person.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[studysled]

bump.

I thought that with like-kind exchanges, there is no gain or loss unless boot is involved.

BEC - 79 (5/13/16)

REG - 76 (7/1/17)

FAR - 89 (9/9/17),  (73 on 3/7/17)

AUD - 80 (11/20/17),  (73 on 5/8/17)

 

 

 

 

[AnotherCPA]

I believe the correct answer is A.

Scott's CV > FV; therefore, there is a loss. Losses are always recognized on nonmonetary transactions.

[Nutcracker2016]

I post this long ago in another thread. I am again posting this here. I hope this helps you.

1) In all non-monetary exchanges whether it has commercial substance or it lacks it new asset is a PLUG. Do your journal entries first before arriving at the value . Don’t record it with any number given in the problem.
2) In all non-monetary problems, record with only Book values. Fair values are used to compute gains and losses.
3) In exchanges lacking commercial substance, person receiving the money ONLY will record the GAIN. if it is >25% recognize all gains. If It is less than that recognize proportionate amount only for example if it is 10% recognize ONLY 10%. Person giving the money WON’T recognize any gain
4) Gain formula is nothing but cash received /FMV of the asset . For example if the FMV of the asset given by the person who is receiving cash is 50000 and FMV of the product he is giving is 500000 then it is 50000/500000= 10%.
5) For example, If the seller is receiving cash $50,000 and FMV 500000 and giving away old land CV in his books for 350000 entry is Dr.New land (PLUG) 315000
Dr. Cash 50000
Cr. Old land 350000
Cr. Gain on exchange 15000
6) Receivers books
NEW(PLUG)
Cr. Cash
Cr Old land

Trust in yourself. It is the key to passing any exam.

Passed: FAR -1st attempt

AUD-2nd attempt

REG-1st attempt

BEC- 3rd attempt

DONE

[Globetrotter]

Nutcracker2016,
Should the denominator in # 4 be $550,000 instead of $500,000? I think the ratio = cash received/(cash received + FV of asset received).
I am studying for FAR and want to make sure that I am on the right track. 🙂

AnotherCPA,
I agree with you that correct answer is A. Answer B (that original poster suggested) would not be correct at all, because there is definitely no gain.

Thank you.

AUD - 94
BEC - 87
FAR - 87
REG - 87

BEC - 87 (03/2019)

AUD - 94 (11/2018)

REG - 87 (06/2019)

FAR - 87 (08/2018)

[Author]

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