Asked by Tyrin Davis on Jun 17, 2024
Verified
Renault Marina exchanged a boat with a cost of $80, 000 (now 75% depreciated) for another boat with a current fair value of $27, 000.No boot was paid or received.The new boat will perform the exact same function as the old boat.Renault should record the new boat at
A) $20, 000
B) $27, 000
C) $ 7, 000
D) $ 0
Fair Value
An estimate of the market value of an asset, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a seller.
Boot
Additional value or cash given along with a trade or exchange to equalize the value between traded items.
- Absorb the intricacies of accounting treatments and the documentation procedure for trades involving assets of identical or different natures.
- Absorb the essence of fair value and how it's applied in the exchange of assets.
- Foster the skill to appraise and recognize profitability or deficits resultant from trading nonmonetary assets.
Verified Answer
AG
Alice GathoniJun 22, 2024
Final Answer :
B
Explanation :
The new boat should be recorded at its current fair value of $27,000 as no boot was exchanged. The cost and accumulated depreciation of the old boat are not relevant in this transaction.
Learning Objectives
- Absorb the intricacies of accounting treatments and the documentation procedure for trades involving assets of identical or different natures.
- Absorb the essence of fair value and how it's applied in the exchange of assets.
- Foster the skill to appraise and recognize profitability or deficits resultant from trading nonmonetary assets.