Timmons Company traded machinery with a book value of $185,000 and a fair value of $200,000.It received in exchange from Lewis Company a machine with a fair value of $180,000 and cash of $20,000.Lewis's machine has a book value of $190,000.What amount of gain should Timmons recognize on the exchange?

Question

Quizplus · Accepted Answer

Timmons recognizes a gain of $15,000 on the exchange because the fair value of the assets received ($180,000 + $20,000 = $200,000) exceeds the book value of the assets given up ($185,000).

Timmons Company Traded Machinery with a Book Value of $185,000