Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y has a machine with a book value of $10,000 and a fair value of $9,000. Company X and Y exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the exchange. The transaction is deemed to lack commercial substance. Assuming that the book value method is used, Company X would record:
A) no gain or loss on this transaction.
B) a gain of $1,000 on this transaction.
C) a loss of $1,000 on this transaction.
D) a loss of $2,000 on this transaction.

Question

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The Answer of Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y has a machine with a book value of $10,000 and a fair value of $9,000. Company X and Y exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the exchange. The transaction is deemed to lack commercial substance. Assuming that the book value method is used, Company X would record:
A) no gain or loss on this transaction.
B) a gain of $1,000 on this transaction.
C) a loss of $1,000 on this transaction.
D) a loss of $2,000 on this transaction.

Company X Has a Machine with a Book Value of $10,000