Reference no: EM131723442
Question - In 2017, Company A and Company B exchanged parcels of farmland. To complete the exchange, Company B paid Company A $150,000 cash. Information about the exchange is included below
Company A's Land Company B's Land
Fair Market Value $500,000 $350,000
Original Cost $400,000 $190,000
Assuming commercial substance, provide the journal entry Company B would make to reflect the exchange.
Assuming no commercial substance, determine the amount of the gain (loss) recognized by Company A for the exchange on its 2017 income statement.
Assuming no commercial substance, determine the balance sheet amount at which Company A will report the land it received on the date of the exchange.
In general, how does a company determine if an exchange has commercial substance?