Choice "a" is correct. It appears, based on the information provided in the question, that this transaction is a nonmonetary exchange that lacks commercial substance. As such, it is an exception to the general rule of basing the measurement value of the exchange on fair value.

Why does the exchange appear to lack commercial substance? The assets are stated to be similar, which is often an indication that the risk, timing, or amount of the expected future cash flows from the assets received do not appear to differ significantly from the risk, timing, or amount of expected future cash flows from the assets transferred. In this question, the assets have a similar productive use, and no cash changes hands, so a conclusion that the exchange lacks commercial substance appears to be warranted.

Now that we know that the exchange does not have commercial substance, let's look at the transaction a little closer. In the question, no boot is received or paid. However, the carrying amount of the asset surrendered exceeds the fair value of the asset surrendered. That means a loss. The loss should have already been recognized as part of the impairment process, but since it was not, a loss would be recognized in the exchange transaction.

Choices "b", "c", and "d" are incorrect per the above explanation.

My query is, where in the question, the examiner is saying that the carrying amount of the asset surrendered exceeds the fair value of the asset surrendered.

Does it matter if Carrying Cost is greater than the F.V of the asset received. Shouldn't we measure the Gain/Loss on the assets surrendered.

Please i need someone help.