Question
Two companies, Paltel Co. and Expand Co., are in the home building business. Each owns a tract of land held for development, but each would
Two companies, Paltel Co. and Expand Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained:
Paltel Land Expand Land
Cost and book value $192,000 $120,000
Fair value based upon appraisal 220,000 210,000
The exchange was made, and based on the difference in appraised fair values, Expand paid $10,000 to Paltel. The exchange has commercial substance.
For financial reporting purposes, Hager should recognize a gain on this exchange of
Select one:
a. $0.
b. $10,000
c. $90,000
d. $28,000
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