Hoyle Company traded machinery with a book value of $285,000 and a fair value of $270,000.It received in exchange from Durler Company a machine with a fair value of $300,000.Hoyle also paid cash of $30,000 in the exchange.Durler's machine has a book value of $285,000.What amount of gain or loss should Hoyle recognize on the exchange?

Question

Quizplus · Accepted Answer

In an exchange of non-monetary assets, gain or loss is recognized only when the fair value of the asset received differs from the book value of the asset given up. In this case, Hoyle's machinery had a book value of $285,000 but was traded for a machine with a fair value of $300,000 and $30,000 cash. Therefore, Hoyle should recognize a loss of $15,000 ($285,000 - $300,000 = -$15,000). The correct answer is D).

Hoyle Company Traded Machinery with a Book Value of $285,000