On December 1, 2020, Coronado Industries acquired new equipment in exchange for old equipment that it had acquired in 2017. The old equipment was purchased for $219000 and had a book value of $84600. On the date of the exchange, the old equipment had a fair value of $94000. In addition, Coronado paid $289000 cash for the new equipment, which had a list price of $389000. The exchange lacked commercial substance. At what amount should Coronado record the new equipment for financial accounting purposes? $383000. $289000. $373600. $389000

Question

Business

Xavier Sullivan

5 February, 02:26

On December 1, 2020, Coronado Industries acquired new equipment in exchange for old equipment that it had acquired in 2017. The old equipment was purchased for $219000 and had a book value of $84600. On the date of the exchange, the old equipment had a fair value of $94000. In addition, Coronado paid $289000 cash for the new equipment, which had a list price of $389000. The exchange lacked commercial substance. At what amount should Coronado record the new equipment for financial accounting purposes? $383000. $289000. $373600. $389000

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Corey Pittman · Answer 1

The amount Coronado would record the new equipment for financial accounting purposes is $383,000

Explanation:

The new equipment would be recorded at fair value when purchased. The fair of the new equipment comprises of two components, the fair value of old equipment exchanged plus the cash paid as the balance.

New equipment=$94,000+$289,000=$383,000

The correct option is the first of the options provided.

The list price is irrelevant as to reference was made to it by the seller when making the sale.