On December 1, 2020, Kelso Company acquired new equipment in exchange for old equipment that it had acquired in 2017. The old equipment was purchased for $210,000 and had a book value of $79,800. On the date of the exchange, the old equipment had a fair value of $84,000. In addition, Kelso paid $273,000 cash for the new equipment, which had a list price of $378,000. The exchange lacked commercial substance. At what amount should Kelso record the new equipment for financial accounting purposes?

a. $273,000.

b. $352,800.

c. $357,000.

d. $378,000.

Question

Business

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23 May, 03:27

On December 1, 2020, Kelso Company acquired new equipment in exchange for old equipment that it had acquired in 2017. The old equipment was purchased for $210,000 and had a book value of $79,800. On the date of the exchange, the old equipment had a fair value of $84,000. In addition, Kelso paid $273,000 cash for the new equipment, which had a list price of $378,000. The exchange lacked commercial substance. At what amount should Kelso record the new equipment for financial accounting purposes?

a. $273,000.

b. $352,800.

c. $357,000.

d. $378,000.

+4

Answers (1)

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Papa · Answer 1

c. $357,000.

Explanation:

Since the exchange lacked commercial substance, the amount Kelso should record for the new equipment, for financial accounting purposes, is the actual amount paid in cash ($273,000) added to the old equipment's fair value ($84,000):

A = $273,000 + $84,000 = $357,000

Therefore, the answer is c. $357,000.