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What amount of gain or loss that kapono would recognize

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Reference no: EM131816221

Case A - Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000 (original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid $20,000 cash to complete the exchange. The exchange has commercial substance.

Required:

1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?

2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.

Case B - Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchange has commercial substance.

Required:

1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land?

2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.

3. Repeat requirement 1 assuming that the exchange lacked commercial substance.

Reference no: EM131816221

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