Acme Corp. entered into an exchange transaction with XYZ Co. Acme gave XYZ used production equipment and $5,000. In return, Acme received two used vehicles. The production equipment Acme gave up related to a discontinued product and had been idle for the previous three months. The equipment cost Acme $180,000 and depreciation of $150,000 had been recorded at the time of the exchange. Acme had attempted to sell the equipment but was unable to locate a buyer until XYZ proposed the current exchange.

The vehicles Acme received will be used in current operations. Acme has needed these vehicles for some time but due to cash flow concerns have not been able to purchase these type vehicles. The company has relied on rentals to carry out the companys needs. Acme has determined, based on market sources, fair value estimates for each of the vehicles. Vehicle 1s fair value estimate is $15,000 and Vehicle 2s fair value estimate is $30,000.

Acmes controller, Chuck Hayes, has never dealt with this type of transaction. He is seeking advice and guidance from you. prepare a report for him discussing the issues associated with this transaction and alternatives for accounting for the transaction. Also, based on the information, make a recommendation for the most appropriate method to account for the exchange. Provide authoritative support for all positions taken.