FAR 2 Accounting for non-monetary exchanges

Question 1

Exchanges of nonmonetary assets be categorized into one of two groups

Answer 1

Exchanges having commercial substance - if the future cash flows change as a result of the transaction.
Exchanges lacking commercial substance-

Question 2

Exchanges having commercial substance

Fair value approach

Answer 2

New asset FV
Accumulated depreciation
Cash received
LOSS 
                    Old asset BV
                     Cash given
                     GAIN

Question 3

Exchanges lacking commercial substance

Answer 3

1. GAINS
   No boot is received- no gain
   Boot is paid - no gain
   Boot is received - gain
   - recognize all of the gain 25% or more rule
   - recognize proportional gain 25% or less rule
2. LOSS - recognized in full

Question 4

Involuntary converstions

Answer 4

Gains and losses recognized in full

Question 5

Exchanges lacking commercial substance

Answer 5

1. GAINS
   No boot is received- no gain
   Boot is paid - no gain
   Boot is received - gain
   - recognize all of the gain 25% or more rule
   - recognize proportional gain 25% or less rule
2. LOSS - recognized in full

Question 6

Involuntary converstions

Answer 6

Gains and losses recognized in full