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tosa2002east
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Newbie

Joined: 23 Apr 2011
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Posts: 1

Posted: 23 Apr 2011 at 16:18 \| IP Logged

Amble Inc exchanged a truck with a book value of $12,000 and a fair value of $20,000 for a truck and $5,000 cash. The exchange has commercial substance. At what amount should Amble record the truck received?

A. $12,000
B. $15,000
C. $20,000
D. $25,000

Tom King
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Joined: 19 Mar 2010
Location: United States
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Posts: 13

Posted: 25 Apr 2011 at 23:32 \| IP Logged

Dr. New Truck 15,000, Dr. Cash 5,000, Cr. Old Truck 12,000, Cr. Gain on disposal 8,000.

Gains/Losses are ALWAYS recognized in exchanges having commercial substance. New Truck is a plug number.

Godgift
Regular
Regular

Joined: 15 Oct 2009
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Posts: 100

Posted: 26 Apr 2011 at 10:55 \| IP Logged

Always use fair value of asset given up + cash received or - cash
paid. For transaction that have commercial value

20,000- 5,000= 15,000.

And use above info, if question should ask for gain or loss.

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