Asked by Aaron Silver on Jun 03, 2024
Verified
Presume that an asset exchange transaction does not culminate an earning process and that the transaction does not involve cash.In such a case
A) a gain will be recognized only when the fair value of the acquired assets exceeds the book value of the relinquished assets.
B) a loss will be recognized only when the fair value of the acquired assets exceeds the book value of the relinquished assets.
C) the assets acquired are recorded at the book value of the assets relinquished.
D) a gain will be recognized only when the fair value of the acquired assets exceeds the fair value of the relinquished assets.
Asset Exchange Transaction
A transaction where one asset is given up in exchange for another asset, with both having a measurable fair value.
Acquired Assets
Assets obtained through purchase or merger by a company.
- Explain the management of exchange transactions and the circumstances that determine the recognition of profits or losses.
Verified Answer
MC
Mirka ChacónJun 08, 2024
Final Answer :
C
Explanation :
In an asset exchange transaction where there is no cash involved and no earning process culminating, the assets acquired will be recorded at the book value of the assets relinquished. Therefore, choice C is the correct answer. Choice A, B, and D are incorrect because they all involve recognizing a gain or loss based on the fair value of the assets, which is not applicable in this scenario.
Learning Objectives
- Explain the management of exchange transactions and the circumstances that determine the recognition of profits or losses.
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