Non Monetary Exchanges

Question 0

What is required for the transaction to lack commercial substance? 2

Answer 0

1 cash flows do not Change in their risk, timing and amount and

2 do not include tax effects when considering the cash flows

Question 1

3 exception criteria for non monetary exchange asset?

Answer 1

1 FV of asset received and asset given up are both unknown or

2 the exchange transaction is done to facilitate sales or

3 the transaction lacks commercial substance

Question 2

In exchange of nonmonetary assets, if no exception exists then use…

Answer 2

The Fair value method

Question 3

Fair value method

Answer 3

Calculate the realized gain/loss of fair value of assets given up
Vs. CV of assets given up

Question 4

Under the fair value method, if you do not know the fair value of assets given up, then…

Answer 4

Use fair value of assets received

Question 5

Recognized losses under the fair value method:

Why should you recognize them?

Answer 5

Recognize realized loss because of conservatism

Question 6

Recognized gains under the fair value method:

Why should you recognize them?

Answer 6

Recognize realized gain because the exception criteria are

Not met

Question 7

Nonmonetary transactions:

When the fair value of asset received and asset given up are both unknown, what method is used?

Answer 7

Carrying value method is used

Question 8

Nonmonetary transactions:

When the fair value of asset received and asset given up are both unknown, do not calculate…

Answer 8

Realized gain/loss. It’s not needed

Question 9

Journal entry for fair value method, when no exception criteria are meth and there is a gain and a loss on the transaction.

Answer 9

Asset received. (Fair value)
Loss. (Calculated)
Accumulated depreciation (On books)
Asset given up. (Historical cost)
Gain. (Calculated)

Question 10

Journal entry for nonmonetary exchange when criteria of Fair value of asset received and asset given up are both unknown is met.

Answer 10

Asset received. (Plug)
Accumulated depreciation. (On books)
Asset given up. (Historical cost)

Question 11

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

Realized gain or loss is calculated when…3

Answer 11

1 no boot is paid or received

2 boot is paid

3 boot is received

Question 12

Calculate the realized gain of loss on nonmonetary transactions 2

Answer 12

1 Fair value of assets given up va. CV of assets given up

2 if you do not know the fair value of assets given up, then
Just use the fair values of assets received

Question 13

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

What is recognized when no boot is paid or received?

Answer 13

Recognize realized loss

Do not recognize realized gain

Question 14

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

What is the journal entry where no boot is paid or received?

Answer 14

Asset received. (Plug)
Loss. (Calculated)
Acc. Depreciation. (On the books)
Asset given up. (Historical cost)

Question 15

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

What is recognized when boot is paid?

Answer 15

Recognize realized loss

Do not recognize realized gain

Question 16

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

What is the journal entry to record boot paid?

Answer 16

Asset received. (Plug)
Loss. (Calculated)
Acc. Depreciation. (On the books)
Asset Given up. (Historical cost)
Cash. (Boot paid)

Question 17

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

When boot is received what is recognized?

Answer 17

recognize realized loss

Recognize some realized gain prorata

Question 18

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

When boot is received how is some realized gain recognized pro rata on the transaction?

Answer 18

Recognized gain =

[FV of Boot/(FV of boot + FV of Asset Received)] x realized gain

Question 19

In a nonmonetary exchange, when an exchange transaction is done to facilitate sales or lacks commercial substance:

What is the journal entry for boot received when both a loss and gain exist.

Answer 19

Cash. (Received)
Asset received. (Plug)
Loss. (Calculated)
Acc. Depreciation (On the books)
Asset given up. (Historical cost)
Gain. (Calculated)

Question 20

Major exception:

Recognize the entire gain for monetary transactions where…

Answer 20

Boot received is 25% or more of the fair value of the exchange