Accounting: J & J exchanged an asset with a book value of $10,000

Subject: Business    / Accounting
Question

J & J exchanged an asset with a book value of $10,000 and paid $1,000 in cash for a another asset from W & W Company with a book value of $10,300. The fair value of the given asset was $9,500 and the new asset was $10,500. Calculate the gain or loss to be recognized by J & J. Assume commercial substance.

$10,500

$9,500

$11,500

None of the above

2.

Which of the following statements concerning exchanges of like kindassets without commercial substance is not true?

Always recognize losses

Gains are not recognized if cash is paid

Losses are recognized if cash is paid

Gains are never recognized

3. J & J trades an asset that had a book value of $18,000 for another asset with a fair market value of $20,000. Assume lack of commercial substance. J & J pays $500 in cash. J & J’s asset has a fair market value of $19,500. J & J would record the cost of the new asset at?

$21,500

$18,500

$19,500

$20,000

4. A loss on the sale of an operating asset results if the proceeds from the sale

are less than the book value of the asset

exceed the book value of the asset

are less than the fair market value of the asset

exceed the fair market value of the asset

5. During periods of inflation which of the following will yield the highest cost of sales

average cost

LIFO

FIFO

Gross profit method