Asset A is owned by TC and has a book value at 12/31/2012 of $9,000. TC exchanged Asset A and $60,000 cash with CE for Asset B At 12/31/2013, the market value of Asset A is $20,000 and the list price of Asset B is $90,000. Assuming that these assets are dissimilar in nature, at what amount should Asset B be recorded by TC?

Question

Quizplus · Accepted Answer

When assets are exchanged in a non-monetary transaction, the recorded amount of the acquired asset is based on the FV of the asset given up, or the FV of the asset acquired, whichever is more clearly evident and readily determinable. In this case, the market value of Asset A at 12/31/2013 is $20,000 which is more clearly evident and readily determinable than the list price of Asset B. Therefore, Asset B should be recorded at its fair value of $80,000 ($20,000 + $60,000 cash paid) rather than the list price of $90,000.

Asset a Is Owned by TC and Has a Book