Question
In 2017, Company A and Company B exchanged parcels of farmland.To complete the exchange, Company B paid Company A $150,000 cash.Information about the exchange is
In 2017, Company A and Company B exchanged parcels of farmland.To complete the exchange, Company B paid Company A $150,000 cash.Information about the exchange is included below
Company A's Land
Company B's Land
Fair Market Value
$500,000
$350,000
Original Cost
$400,000
$190,000
Assuming commercial substance, provide the journal entry Company B would make to reflect the exchange. (2.5 points)
Assuming no commercial substance, determine the amount of the gain (loss) recognized by Company A for the exchange on its 2017 income statement. (2.5 points)
Assuming no commercial substance, determine the balance sheet amount at which Company A will report the land it received on the date of the exchange. (2.5 points)
In general, how does a company determine if an exchange has commercial substance? (2.5 points)
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