In October 2011, Daryl 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, 2011, how much gain should Daryl recognize on this exchange?
A) $0
B) $10,000
C) $30,000
D) $40,000

Question

Quizplus · Accepted Answer

The gain is calculated as the difference between the market value and the book value of the used machine: $280,000 - $240,000 = $40,000.

In October 2011, Daryl Company Exchanged a Used Packaging Machine