Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair vlaue of $480,000 and $120,000 cash is received. The exchange lacked commercial substance.

The new equipment should be recorded at .

a. $480,000.b. $360,000.c. $300,000.d. $288,000.

The correct answer is gain recognized option (a).

Explanation:

According to the scenario, the given data are as follows:

Equipment cost = $660,000

Accumulated depreciation = $300,000

So, the book value of the equipment = Equipment cost  - Accumulated depreciation

Book value = $660,000 - $300,000 = $360,000

New equipment fair value = $480,000

Cash = $120,000

So, New equipment = $480,000 + $120,000 = $600,000

So, we can calculate the total gain by using following formula:

Total gain = New equipment - Book value

= $600,000 - $360,000

= $240,000

So, gain recognized = Total gain × ( cash ÷ New equipment total)

By putting the value

Gain recognized = $240,000 × ( $120,000 ÷ $600,000)

= $240,000 × 0.2

= $48,000

answer; the above statement/question is ( true);

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.