Asked by Dorothy Dietrich on May 09, 2024
Verified
Robards Services exchanged an asset with a cost of $24, 000 (now 40% depreciated) for a nonmonetary asset worth $12, 000.Robards received $2, 000 boot.In the entry to record this exchange, Robards should record
A) a $10, 000 loss
B) a $400 gain
C) no gain or loss
D) a $400 loss
Depreciated
Refers to the reduction in the value of an asset over time due to wear and tear or obsolescence.
Nonmonetary Asset
Assets that cannot be easily converted into cash and hold value in forms other than currency, such as property, equipment, and patents.
Boot
In finance and real estate, boot refers to cash or other property added to an exchange or transaction to make it equitable.
- Attain proficiency in the accounting strategies and the process of jotting down journal entries for exchanges between assets, considering their similarity or dissimilarity.
- Enhance skills to calculate and identify the financial impact associated with the trade of nonmonetary properties.
Verified Answer
SN
ShaBreka NiamekoMay 11, 2024
Final Answer :
D
Explanation :
The book value of the exchanged asset is $14,400 ($24,000 cost - $9,600 accumulated depreciation).
Since the nonmonetary asset received has a fair value of $12,000 and cash of $2,000 is received, the total fair value of assets received is $14,000 ($12,000 + $2,000).
Therefore, there is a loss on the exchange of $400 ($14,000 received - $14,400 book value of the exchanged asset).
The entry to record the exchange would be:
Nonmonetary asset received $12,000
Cash received $2,000
Loss on exchange $400
Asset exchanged (with accumulated depreciation) $24,000
Since the nonmonetary asset received has a fair value of $12,000 and cash of $2,000 is received, the total fair value of assets received is $14,000 ($12,000 + $2,000).
Therefore, there is a loss on the exchange of $400 ($14,000 received - $14,400 book value of the exchanged asset).
The entry to record the exchange would be:
Nonmonetary asset received $12,000
Cash received $2,000
Loss on exchange $400
Asset exchanged (with accumulated depreciation) $24,000
Learning Objectives
- Attain proficiency in the accounting strategies and the process of jotting down journal entries for exchanges between assets, considering their similarity or dissimilarity.
- Enhance skills to calculate and identify the financial impact associated with the trade of nonmonetary properties.