Flashcards in Nonmonetary exchange Deck (19)
Exchanges are considered to have commercial substance when...
The asset will generate revenue and will be used DIFFERENT than the old asset
Non monetary assets to do have a stated value, as do cash and AR. TF
Plant assets are __________ because they have no stated value.
The general principle is to value the incoming asset at _____ _______, and record a _______ or ______ based on the old assets FV and BV.
Fair value, gain or loss
If neither of the assets within the exchange FVs cannot be determined, the new asset is recorded at the ____ _____ of the old asset _____ cash paid or less cash received.
The gain or loss on the exchange is computed only in regard to the OLD asset.
True, Old FV-BV = gain or loss
List price is the starting point for determining FV. TF
Trade in allowance is the _____ in list price granted on the asset exchanged.
Commercial substance gains and losses are deferred. TF
False, recognized immediately
No gain or loss is recorded for exchanges that are exchanges of inventory or whose FV cannot be determined. TF
The sellers BV of an asset that was exchanged is a reliable substitute for FV. TF
How is a new asset recorded when FV is not determinable?
BV of old asset +/- cash rec. or paid. No gain or loss is recorded.
If an exchange lacks commercial substance, and a gain is evident but cash is NOT received, how is the new asset recognized?
New Asset = BV of old asset + cash paid
Losses are always recognized in full. Whether or not commercial substance, or cash is paid or received. TF
True. Except for commercial substance exchanges of inventory.
No commercial substance, cash received, gain treatment (>25% ) is...
New asset (FV of new asset - unrecognized portion of gain)(PLUG)
Acc Dep (given)
Old Asset (given)
Gain ((cash rec/old asset FV) x the gain)
No commercial substance, cash received, full gain treatment is..
New Asset (plug)
Acc Dep (given)
Old Asset (given cost)
Gain (full amount)
When an exchange lacks commercial substance and cash is paid, the new asset is recorded at the _____ _____ of the old asset ______ any cash given.
Book value, plus
In exchanges with no commercial substance, gains are recognized in proportion to the amount of cash received. TF
True, unless over 25% then the whole gain is recognized in full