Richards, Inc. exchanged a piece of equipment with an original cost of $82,000, accumulated depreciation to date of $40,000, and a fair value of $46,000 for a similar piece of equipment. Cash flows are not expected to change significantly. The newly acquired equipment had a book value of $40,000 and a fair market value of $41,000. At what value should Richard record the newly-acquired equipment?

Question

Quizplus · Accepted Answer

The newly-acquired equipment should be recorded at its fair value, which is $46,000, because the exchange lacks commercial substance and the fair values are determinable.