Paulinersquos receives a 5000 credit instead of a cash

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Reference no: EM13479970

Pauline’s Pastry Shop decides to remodel its offices this year. As part of the remodeling, Pauline’s trades furniture with a cost of $12,000 that had been expensed in the year of purchase (Section 179 expense election) for new furniture costing $22,000. Pauline’s receives a $5,000 credit (instead of a cash receipt) for the old furniture and borrows the remaining $17,000 from Easy Finance Company.

a.What is Pauline’s realized gain or loss on the old furniture? Maybe 0

b.What is Pauline’s recognized on the exchange?

c.What is Pauline’s deferred gain on the exchange?

d.What is the basis of the new furniture?

Reference no: EM13479970

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