Accounting for Non Monetary Exchange

Question 1

Accounting for non-monetary exchange with Commercial substance

Answer 1

Record everything at FV
use the following J/E
DR: Asset Received @ FV
DR: Acc Dep of Asset Given
DR: (Plug) loss if any
        CR:  Asset given ( historical Cost0)
        CR: cash paid ( if any)
         Cr: (Plug) gain
2- easier way to caluculate gain: FV of asset given - Book Value of asset Given.

Question 2

which of the following statements describes the proper accounting for losses when nonmonetary assets are exchanged for other nonmonetary assets?

Answer 2

.
A loss is recognized immediately, because assets received should not be valued at more than their cash equivalent price.
Under the rule of conservatism, losses are recognized in all nonmonetary exchanges when the book value exceeds the fair value of the asset given up. An asset’s cash equivalent price is the asset’s fair value. Assets should not be valued at more than fair value, so when book value exceeds fair value, the asset should be recorded at the lower fair value. When a loss is recorded, the asset received is recorded at the book value of the asset given up plus any cash paid minus any cash received minus the loss recognized.

Question 3

Under IFRS - Accounting for exchange of dissimilar assets

Answer 3

Treat as Xchange with commercial substance, record asset received at Fair Value

Question 4

Under IFRS - Accounting for X-change of similar asset

Answer 4

they are recorded as X-change that don’t generate revenue, so no gain recorded. treat same as X-change with lack of commercial substance with no Boot paid.

Question 5

Accounting for Non-Monetary Exchange - Boot is Paid.

Answer 5

1- calculate boot % of total monetary exchange ( FV of asset given + cash paid).
A) If boot paid less than 25%, then no gain recognized
DR: new asset (Plug)
Dr:(loss) (plug)
CR: Asset given at Book Value
Cr: Cash Paid
B) If boot paid is over 25%, then it is considered a monetary exchange then, gain is recognized.

Question 6

Accounting for Non-Monetary Exchange - Boot is Received

boot is less than 25%

Answer 6

DR: New asset (Plug)
DR: cash (boot) received
CR: asset given at book value
CR: gain ( FV of asset given - BV of Asset Given)* (cash received/total value)