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D & D 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 D & D. Assume commercial substance.

A. $10,500

B. 9,500

C. 11,500

D. None of the above

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Related questions

When selling property, plant, and equipment for cash:

A. The seller recognizes a gain or loss for the difference between the cash received and the fair value of the asset sold.

B. The seller recognizes a gain or loss for the difference between the cash received and the book value of the asset sold.

C. None of the above.

D. The seller recognizes losses, but not gains.

On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows: Robers’ Asset Phifer’s Asset Original cost $ 145,000 $ 165,000 Accumulated depreciation 75,000 83,000 Fair value 82,500 72,500 To equalize the exchange, Phifer paid Robers $10,000 in cash. Required: Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

QUESTION 1

Use the following information to answer the next (8)questions:

Sparky Inc. is trading a machine which has an original cost of$60,000 and accumulated depreciation of $35,000 for another fixedasset. For each of the following independent scenarios, determinethe the original cost Sparky will report on their balance sheet forthe new asset acquired in the exchange and the gain or loss to berecognized on Sparky's Income Statement for the current year.

*If there is a gain record your answer as a positivenumber; if there is a loss, record your answer in parenthesis ().If there is NO gain or loss, type in NE. Round all answers to thenearest whole dollar. Do not use punctuation marks (dollar signs orcommas) in recording your answers.

New Asset's Original Cost Reported on Sparky's Balance Sheet

Gain/Loss

Recognized by Sparky

1. Sparky received in this exchange a machine with a fair valueof $18,000 and also received $10,000 cash. The exchangelacks commercial substance.

$___________

$__________

2. Sparky paid $8,000 cash and traded the old asset to receive amachine with fair value of $40,000. The transactionlacks commercial substance.

$___________

$___________

3. Sparky exchanged their old asset to receive a machine with afair value of $25,000. Sparky also received $5,000 cash. Thetransaction lackscommercialsubstance.

$___________

$___________

4. Sparky paid $5,100 and exchanged the old asset to receive anew asset with a fair value of $28,000. The exchangehas commercial substance.

$___________

$___________

1. In Scenario #1, determine the original cost of the New Assetthat Sparky will report on their balance sheet as a result of thistransaction. $[Blank_1]

1 points

QUESTION 2

For Scenario #1, determine the gain/loss Sparky will report as aresult of this transaction:

$[Blank_2]

1 points

QUESTION 3

For Scenario #2, determine the original cost of the New Assetthat Sparky will report on their Balance Sheet as a result of thisexchange. $[Blank_3]

1 points

QUESTION 4

For Scenario #2 above, determine the gain/loss that Sparky willreport as a result of this exchange. (*Note: If a gain isindicated, record your answer as a positive number; if a loss isindicated record your answer as a negative number using parenthesis( ), if no gain or loss should be reported, record your answer asNE.)

1 points

QUESTION 5

For Scenario #3, determine the original cost of the New Assetthat Sparky will report on their Balance Sheet as a result of thisexchange. $[Blank_5]

1 points

QUESTION 6

For Scenario #3, indicate the gain/loss Sparky will report as aresult of this exchange.

$[Blank_6]

1 points

QUESTION 7

For Scenario #4, determine the original cost of the New Assetthat Sparky will report on their balance sheet as a result of thisexchange. $[Blank_7]

1 points

QUESTION 8

For Scenario #4, determine the gain/loss that Sparky will reportas a result of this exchange.

(*Note: If a gain is indicated, record your answer as a positivenumber; if a loss is indicated record your answer as a negativenumber using parenthesis ( ), if no gain or loss should bereported, record your answer as NE.)

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