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Which statements is true if the exchange lacks

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VWX Corporation owns a building which originally cost $1,000,000. VWX exchanges the building in the current year for a different building better suited to its needs. On the date of the exchange the old building has a book value of $720,000 and an estimated FMV of $640,000. As part of the transaction, VWX receives $40,000 cash.

Question 1: Which of the following statements is true if the exchange lacks commercial substance?

More than one other answer choice is correct.

  1. The new fixed asset will be recorded with a cost of 675,000.
  2. The new fixed asset will be recorded with a cost of 680,000.
  3. The new fixed asset will be recorded with a cost of 600,000.
  4. The loss recognized on the exchange will be $5,000.
  5. None of the other answer choices is corrrect.
  6. No gain or loss will be recorded on the exchange.

Reference no: EM132508836

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