The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded at
A) the fair value of the asset given up, and a gain or loss is recognized.
B) the fair value of the asset given up, and a gain but not a loss may be recognized.
C) the fair value of the asset received if it is equally reliable as the fair value of the asset given up.
D) either the fair value of the asset given up or the asset received, whichever one results in the largest gain (smallest loss) to the company.

Question

Quizplus · Accepted Answer

The cost of a nonmonetary asset acquired in an exchange with commercial substance is typically recorded at the fair value of the asset given up, with any resulting gain or loss recognized. This approach reflects the economic reality of the transaction by measuring it at the current market value of the assets involved.

The Cost of a Nonmonetary Asset Acquired in Exchange for Another