Marlin Company traded machinery with a book value of $180,000 and a fair value of $300,000.It received in exchange from Keach Company a machine with a fair value of $270,000 and cash of $30,000.Keach's machine has a book value of $285,000.What amount of gain should Marlin recognize on the exchange?

Question

Quizplus · Accepted Answer

Marlin's gain on the exchange is the difference between the fair value of the assets received and the book value of the assets given up. The fair value of the assets received is $270,000 (the fair value of the machine) + $30,000 (the cash received) = $300,000. The book value of the assets given up is $180,000. Therefore, Marlin's gain on the exchange is $300,000 - $180,000 = $120,000.

Marlin Company Traded Machinery with a Book Value of $180,000