B&V Enterprises exchanged a used crane with an original cost of $200,000 and accumulated depreciation of $140,000 for a truck with a fair market value of $100,000.B&V also paid cash of $25,000.What amount of gain should B&V report on this transaction?
A)$0
B)$15,000
C)$40,000
D)$100,000

Question

Quizplus · Accepted Answer

The book value of the crane is calculated as its original cost ($200,000) minus accumulated depreciation ($140,000), which equals $60,000. When exchanging the crane for a truck valued at $100,000 and also paying $25,000 in cash, the total value given up is $85,000 ($60,000 book value of the crane + $25,000 cash). Since the fair market value of the truck is $100,000, the gain on this transaction is the difference between the fair market value of the truck received ($100,000) and the book value of the crane plus cash paid ($85,000), which equals $15,000.

B&V Enterprises Exchanged a Used Crane with an Original Cost