Non-Monetary Exchanges - CPA Financial Accounting and Reporting (FAR)
Card 1 of 20
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
Tap to reveal answer
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
← Didn't Know|Knew It →
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
Tap to reveal answer
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
← Didn't Know|Knew It →
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
Tap to reveal answer
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
← Didn't Know|Knew It →
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
Tap to reveal answer
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
← Didn't Know|Knew It →
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Tap to reveal answer
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
← Didn't Know|Knew It →
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
Tap to reveal answer
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
← Didn't Know|Knew It →
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
Tap to reveal answer
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
← Didn't Know|Knew It →
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
Tap to reveal answer
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
← Didn't Know|Knew It →
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
Tap to reveal answer
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
← Didn't Know|Knew It →
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Tap to reveal answer
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
← Didn't Know|Knew It →
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
Tap to reveal answer
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
← Didn't Know|Knew It →
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
Tap to reveal answer
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
← Didn't Know|Knew It →
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
Tap to reveal answer
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
← Didn't Know|Knew It →
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
Tap to reveal answer
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
← Didn't Know|Knew It →
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Tap to reveal answer
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
← Didn't Know|Knew It →
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
On January 2, Year 1, a company buys a piece of equipment for $50,000 with a 10 year life and a residual value of $8,000. It is depreciated using the straight line method. On July 1, Year 4, the equipment is worth $44,000 and is traded for a van worth $46,000. What amount of gain is recognized on this exchange?
Tap to reveal answer
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
Depreciation is recorded at $4,200 per year ($50K purchase price - $8K residual value over 10 years) for 3.5 years. The total book value at the time of the exchange is $35,300 ($50K purchase price - $14,700 depreciation). This book value is compared to the old asset's fair value to determine how much gain is realized ($44K FV - $35,300 BV). Because this transaction has commercial substance the gain is recognized.
← Didn't Know|Knew It →
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
The Scott Company owns an asset with a cost of $320,000, a book value of $305,000, and a fair value of $345,000. The asset is traded for another asset and the exchange is viewed as having no commercial substance. Which of the following is true regarding the exchange?
Tap to reveal answer
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
When an exchange has no commercial substance, and no cash changes hands, the new asset is booked at the book value of the old asset.
← Didn't Know|Knew It →
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
ABC factored receivables without recourse with DEF bank. ABC received cash as a result of the transaction , which is best described as a:
Tap to reveal answer
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
Factoring A/R without recourse is a sales transaction. Factoring without recourse transfers risk of collectability to the buyer.
← Didn't Know|Knew It →
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
One method of estimating uncollectible accounts emphasizes the asset valuation over income measurement. This is the allowance method based on:
Tap to reveal answer
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
Estimating bad debt on aging of receivables is a good matching of revenue and expense. It focuses on the balance sheet and emphasizes the valuation of assets.
← Didn't Know|Knew It →
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Under IFRS rules, the is required for recognizing revenue from construction contracts.
Tap to reveal answer
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
The percentage of completion method for revenue recognition is required under IFRS unless the final outcome of the construction project cannot be reasonably estimated.
← Didn't Know|Knew It →