Ellis Construction Company recently exchanged an old truck, which cost $108,000 and was one-third depreciated, and paid $70,000 cash for a similar truck having a current fair value of $130,000. The exchange lacked commercial substance. At what amount should the truck be recorded on the books of Ellis?
A) $70,000
B) $108,000
C) $130,000
D) $142,000

Question

Quizplus · Accepted Answer

The truck should be recorded at its fair value of $130,000 because the exchange lacked commercial substance.

Ellis Construction Company Recently Exchanged an Old Truck, Which Cost