In January 2014,Shone Company exchanged an old machine,with a book value of $156,000 and a fair value of $140,000,and paid $40,000 cash for a similar used machine having a list price of $200,000.The exchange had commercial substance.At what amount should the machine acquired in the exchange be recorded on Shone's books?
A) $200,000
B) $196,000
C) $184,000
D) $180,000

Question

Quizplus · Accepted Answer

The cost of the new machine acquired in the exchange is the fair value of the old machine plus any cash paid. 
Cost of new machine = Fair value of old machine + Cash paid 
= $140,000 + $40,000 
= $180,000 
Therefore, the machine acquired in the exchange should be recorded on Shone's books at $180,000. Therefore, the correct choice is D.

In January 2014,Shone Company Exchanged an Old Machine,with a Book