Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $12,000 and a fair market value of $15,000. The asset given up by Armstrong Co. has a book value of $20,000 and a fair market value of $19,000. Boot of $4,000 is received by Armstrong Co.
-What amount should Armstrong Co. record for the asset received?

Question

Quizplus · Accepted Answer

The asset received by Armstrong Co. should be recorded at its fair market value, which is $19,000. The boot received of $4,000 is added to the fair market value of the asset given up by Armstrong Co. ($19,000) to arrive at the total value of the asset received ($23,000).

Glen Inc and Armstrong Co