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Gabrielle Inc.and Lucci Company have an exchange with no commercial substance.The asset given up by Gabrielle has a book value of €120,000 and a fair value of €135,000.The asset given up by Lucci has a book value of €220,000 and a fair value of €200,000.Boot of €65,000 is received by Lucci.
-What amount should Gabrielle record for the asset received?

Question

Quizplus · Accepted Answer

Gabrielle should record the asset received at the fair value of the asset given up (€135,000) plus the boot received (€65,000), totaling €200,000. However, since the exchange lacks commercial substance, the gain is deferred, and the asset is recorded at the book value of the asset given up (€120,000) plus the boot received (€65,000), totaling €185,000.

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