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15 September, 22:47

Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively. Assuming that the exchange lacks commercial substance, Alamos would record a gain / (loss) of: A. $26,000. B. $8,000. C. $ (8,000). D. $0.

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  1. 16 September, 02:09
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    correct option is B. $8,000

    Explanation:

    given data

    equipment = $18,000

    book value = $82,000

    fair value = $90,000

    to find out

    Alamos would record a gain / (loss)

    solution

    we know that When exchange have commercial substance we need to record the gain arising from transfer of old assets

    so here Gain on transfer of old assets is

    Gain on transfer of old assets = fair value of the old equipment - book value of the old equipment ... 1

    Gain on transfer of old assets = $90,000 - $82,000

    Gain on transfer of old assets = $8,000

    so here correct option is B. $8,000
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