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  • Asset Exchanged at A Gain: Cost of New Asset Acquired: Gain On Exchange of Old Asset

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    Steven Sanderson
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    An old asset that was purchased for $20,000 on 1/1/96 and had a fair market value of $8,000 on the exchange date of 1/1/99 was exchanged for a similar new asset. The exchange included a cash payment of $10,000. The book value of the old asset was $5,000 so there was a $3,000 gain on the exchange to recognize. The cost of the new asset is $15,000, which is the fair value of the old asset ($8,000) plus the cash paid ($10,000) less the gain recognized ($3,000).

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    TT 10-L5

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    An old asset that was purchased for $20,000 on 1/1/96 and had a fair market value of $8,000 on the exchange date of 1/1/99 was exchanged for a similar new asset. The exchange included a cash payment of $10,000. The book value of the old asset was $5,000 so there was a $3,000 gain on the exchange to recognize. The cost of the new asset is $15,000, which is the fair value of the old asset ($8,000) plus the cash paid ($10,000) less the gain recognized ($3,000).

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    27 views1 page

    Asset Exchanged at A Gain: Cost of New Asset Acquired: Gain On Exchange of Old Asset

    Uploaded by

    Steven Sanderson
    An old asset that was purchased for $20,000 on 1/1/96 and had a fair market value of $8,000 on the exchange date of 1/1/99 was exchanged for a similar new asset. The exchange included a cash payment of $10,000. The book value of the old asset was $5,000 so there was a $3,000 gain on the exchange to recognize. The cost of the new asset is $15,000, which is the fair value of the old asset ($8,000) plus the cash paid ($10,000) less the gain recognized ($3,000).

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    PLANT ASSET DISPOSALS — EXCHANGE OF SIMILAR ASSETS

    Asset Exchanged at a Gain


    Asset originally purchased on 1/1/96 is exchanged for a similar asset on 1/1/99. Cash of
    $10,000 is also paid and the old asset has fair market value of $8,000 on the date of
    exchange.
    Equipment Accumulated Depreciation-Equipment
    20,000 12/31/96 5,000
    12/31/97 5,000
    12/31/98 5,000
    Bal. 15,000
    Book Value = $5,000

    Entry:
    Equipment (new) 15,000
    Accumulated Depreciation-Equipment 15,000
    Equipment (old) 20,000
    Cash 10,000
    Cost of new asset acquired: Gain on exchange of old asset:
    Fair value of old asset $ 8,000 Fair value of old asset $8,000
    Cash paid 10,000 Book value of old asset 5,000
    18,000 Gain on disposal $3,000
    Less: Gain on disposal 3,000
    $15,000

    Copyright 1999 John Wiley & Sons, Inc. Weygandt/Principles 5e T T 10–L

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