Tiktok Co. acquired a piece of factory equipment overseas on cash basis for 400,000. Additional costs incurred include the following: commission paid to broker for the purchase of the equipment, 20,000; import duties of 100,000; non-refundable purchase taxes of 40,000; freight cost of transferring the equipment to Tiktok Co's premises, 4,000; costs of assembling and installing the equipment, 8,000; costs of testing the equipment, 6,000; administration and other general overhead costs, 16,800; and advertisement and promotion costs of the new product to be produced by the equipment, 15,200. The samples generated from testing the equipment were sold at 2,000.

1.How much is the initial cost of the equipment?

a.576,000

b.578,000

c.592,800

d.594,800

Insta Co. acquired land with fair value of4,000,000 in exchange for Insta's 10,000 shares with par value of 40 per share and quoted price of 360 per share.

2.How much gain (loss) should Insta Co. recognize on the exchange?

a.0

b.(400,000)

c.3,200,000

d.400,000