Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will

Question

Quizplus · Accepted Answer

When a company exchanges one plant asset for a similar plant asset and gives cash in the exchange, and the exchange does not materially change the future cash flows for either entity, any gain indicated on the disposal of the old asset effectively reduces the amount to be recorded as the cost of the new asset. This treatment prevents the recognition of gains that have not been realized in economic terms, ensuring that the new asset's recorded cost reflects its fair value less any cash paid.

Ringler Corporation Exchanges One Plant Asset for a Similar Plant