Asset A, owned by LC, had a book value of $8,000 at 12/31/2011. At that time, LC exchanged Asset A and $50,000 cash with AE for B The market value of Asset A and the asking price of Asset B were $13,000 and $77,000, respectively, at 12/31/11. Assuming that these assets were dissimilar in nature, at what amount should Asset B be recorded by LC?Asset

Question

Asset A, owned by LC, had a book value of $8,000 at 12/31/2011. At that time, LC exchanged Asset A and $50,000 cash with AE for  B The market value of Asset A and the asking price of Asset B were $13,000 and $77,000, respectively, at 12/31/11. Assuming that these assets were dissimilar in nature, at what amount should Asset B be recorded by LC?Asset

Quizplus · Accepted Answer

The fair value of Asset A at 12/31/11 was $13,000, but LC exchanged it for Asset B and $50,000 cash. This means that the fair value of Asset B at 12/31/11 was $63,000 ($13,000 + $50,000). Therefore, that is the amount at which Asset B should be recorded by LC.

Asset A, Owned by LC, Had a Book Value of $8,000