1. GikSmile Inc. and FunG Co. made exchange of assets with no commercial substance. GikSmile gave machinery with a book value of $51,000 and a fair value of $70,000. Equipment given by FunG Co. has book value of $72,000 and a fair value of $78,000. GikSmile Co. pays boot of $8,000 to FunG Co. FunG Inc. has the following cost basis for new machinery:

A. 64,615

B. 70,000

C. 72,000

D. 78,000

2. BobCat. traded its old Van for a new sedan and gave $12,000 boot. The transaction had commercial substance. The old van cost $59,000 and had a $41,000 book value and a $32,000 fair value. Which journal entry correctly records the exchange?

A. DR Car 44,000 CR Van 32,000 CR Cash 12,000

B. DR Car 50,000 DR Accumulated depreciation-van 18,000 DR Loss 9,000 CR Van 59,000

C. DR Car 50,000 DR Accumulated depreciation-van 18,000 DR Loss 9,000 CR Van 59,000

D. DR Car 44,000 DR Accumulated depreciation-van 18,000 DR Loss 9,000 CR Van 59,000 CR Cash 12,000