In October 2014,Pollock Company exchanged a used packaging machine having a book value of $240,000 for a new machine and paid a cash difference of $30,000.The market value of the used packaging machine was determined to be $280,000.The exchange had commercial substance.In its income statement for the year ended December 31,2014,how much gain should Pollock recognize on this exchange?
A) $0
B) $10,000
C) $30,000
D) $40,000

Question

Quizplus · Accepted Answer

Since the exchange has commercial substance, Pollock should recognize the full gain calculated as the difference between the market value of the old machine ($280,000) and its book value ($240,000), which equals $40,000.

In October 2014,Pollock Company Exchanged a Used Packaging Machine Having