What is the initial value of the new tractor

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Problem - Case A - Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $20,000 (original cost of $44,000 less accumulated depreciation of $24,000) and a fair value of $10,600. Kapono paid $36,000 cash to complete the exchange. The exchange has commercial substance.

Case B - Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $580,000 and a fair value of $860,000. Kapono paid $66,000 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 of the tractor?

2. Assume the fair value of the old tractor is $30,000 instead of $10,600. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?

Reference no: EM133022894

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