Non-Monetary Assets

Question 1

What is reported amount of an asset in the exchange of non-monetary assets?

Answer 1

Reported amount of an asset is the Book Value of an asset

Question 2

In an, a transaction is reported as a non-monetary exchange of assets, under which circumstances should the exchange be measured based on the reported amount of the non-monetary asset surrendered?

Answer 2

When a transaction involving a nonmonetary exchange lacks commercial substance, the reported amount of nonmonetary assets surrendered is used to record the newly acquired asset. If the transaction has commercial substance, the fair value approach is used.

Question 3

In a commercial substance should you always calculate again?

Answer 3

Yes always look at the FV of asset and Book Value of Asset.
The FV of the asset received must be equal to the FV of the asset given up.
FV of asset given up = FV of asset + Cash

Question 4

If there is gain on a nonmonetary transaction that lacks commercial substance and No Boot is received, how would you recognize the gain

Answer 4

No Boot = No Gain Recognized

If the transaction lack the commercial substance and no Boot is received, no gain is recognized.

Question 5

If transaction lack the commercial substance and Boot is paid and is less than 25% of the total consideration how would you recognize the gain

Answer 5

Boot is Paid = No gain (less than 25% rule)

Question 6

If transaction lack the commercial substance and Boot is received and is less than 25% of the total consideration how would you recognize the gain

Answer 6

Boot is Received = Recognize Proportional Gain (less than 25% rule)

Question 7

If transaction lack the commercial substance and Boot and boot is paid and is more than 25% of the total consideration how would you recognize the gain

Answer 7

Boot is Paid = Recognize the gain (more than 25% rule. Recognize in both cases of Paying and receiving

Question 8

If transaction lack the commercial substance and Boot and boot is received and is more than 25% of the total consideration how would you recognize the gain

Answer 8

Boot is Received = Recognize the gain (more than 25% rule. Recognize in both cases of Paying and receiving.

Question 9

If transaction lack the commercial substance and there is loss, how do you recognize this loss

Answer 9

In all cases the loss is recognized in nonmonetary exchanges.

Question 10

In which cases Gain is not not recognized in nonmonetary exchanges

Answer 10

1- When no Boot is received

2- When boot paid is less than 25% of consideration.

Question 11

In nonmonetary exchanges, if both parties promote each other’s product, would it indicate that exchange has commercial substance?

Answer 11

This exchange would have a commercial substance because this is an exchange that is the culmination of the earning process - the goods are exchanged for promotional purpose

Question 12

If asset (property is acquired by the city in connection with condemnation proceeding, resulting in gain, should this gain be reported?

Answer 12

When a fixed asset is sold (voluntarily or involuntarily) gain or loss is recognized.

Question 13

If you exchange computer plus cash with stock in a company, would it have commercial substance?

Answer 13

YES it will have commercial substance.

Question 14

Building who cost was 250,000 and FV 300,000 was destroyed in Fire. Company spent 10,000 for removal cost. What is the loss?

Answer 14

260,000

The loss will be BV plus the removal cost. That will be Net Book Value (NBV).