In an exchange of plant assets that has commercial substance
A) neither gains nor losses are recognized immediately.
B) gains but not losses are recognized immediately.
C) losses but not gains are recognized immediately.
D) both gains and losses are recognized immediately.

Question

Quizplus · Accepted Answer

In an exchange of plant assets that has commercial substance, both gains and losses are recognized immediately. This is because the new asset received in exchange has a different fair value than the asset given up. The gain or loss is calculated by taking the difference between the fair value of the new asset and the carrying amount of the old asset given up. The gain or loss is recognized immediately on the financial statements.

In an Exchange of Plant Assets That Has Commercial Substance