On December 1, 2010, Kelso Company acquired a new delivery truck in exchange for an old delivery truck that it had acquired in 2007.The old truck was purchased for $35,000 and had a book value of $13,300.On the date of the exchange, the old truck had a fair value of $14,000.In addition, Kelso paid $45,500 cash for the new truck, which had a list price of $63,000.The exchange lacked commercial substance.At what amount should Kelso record the new truck for financial accounting purposes?

Question

Quizplus · Accepted Answer

In an exchange lacking commercial substance, the cost of the new asset is the fair value of the old asset plus any cash paid. Therefore, the cost of the new truck is $14,000 (fair value of old truck) + $45,500 (cash paid) = $59,500.

On December 1, 2010, Kelso Company Acquired a New Delivery