Nonmonetary exchange

Question 1

Exchanges are considered to have commercial substance when…

Answer 1

The asset will generate revenue and will be used DIFFERENT than the old asset

Question 2

Non monetary assets to do have a stated value, as do cash and AR. TF

Answer 2

True

Question 3

Plant assets are __________ because they have no stated value.

Answer 3

Non monetary

Question 4

The general principle is to value the incoming asset at _____ _______, and record a _______ or ______ based on the old assets FV and BV.

Answer 4

Fair value, gain or loss

Question 5

If neither of the assets within the exchange FVs cannot be determined, the new asset is recorded at the ____ _____ of the old asset _____ cash paid or less cash received.

Answer 5

BV, plus

Question 6

The gain or loss on the exchange is computed only in regard to the OLD asset.

Answer 6

True, Old FV-BV = gain or loss

Question 7

List price is the starting point for determining FV. TF

Answer 7

True

Question 8

Trade in allowance is the _____ in list price granted on the asset exchanged.

Answer 8

reduction

Question 9

Commercial substance gains and losses are deferred. TF

Answer 9

False, recognized immediately

Question 10

No gain or loss is recorded for exchanges that are exchanges of inventory or whose FV cannot be determined. TF

Answer 10

True

Question 11

The sellers BV of an asset that was exchanged is a reliable substitute for FV. TF

Answer 11

False

Question 12

How is a new asset recorded when FV is not determinable?

Answer 12

BV of old asset +/- cash rec. or paid. No gain or loss is recorded.

Question 13

If an exchange lacks commercial substance, and a gain is evident but cash is NOT received, how is the new asset recognized?

Answer 13

New Asset = BV of old asset + cash paid

Question 14

Losses are always recognized in full. Whether or not commercial substance, or cash is paid or received. TF

Answer 14

True. Except for commercial substance exchanges of inventory.

Question 15

No commercial substance, cash received, gain treatment (>25% ) is…

Answer 15

New asset (FV of new asset - unrecognized portion of gain)(PLUG)
Acc Dep (given)
Cash (given)
Old Asset (given)
Gain ((cash rec/old asset FV) x the gain)

Question 16

No commercial substance, cash received, full gain treatment is..

Answer 16

New Asset (plug)
Acc Dep (given)
Cash (given)
     Old Asset (given cost)
     Gain  (full amount)

Question 17

When an exchange lacks commercial substance and cash is paid, the new asset is recorded at the _____ _____ of the old asset ______ any cash given.

Answer 17

Book value, plus

Question 18

In exchanges with no commercial substance, gains are recognized in proportion to the amount of cash received. TF

Answer 18

True, unless over 25% then the whole gain is recognized in full

Question 19

When there is no commercial substance, gains are only recognized when cash is _______.

Answer 19

recieved