Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell's truck originally cost $23,000, its accumulated depreciation was $20,000, and its fair value was $5,000. Highway's truck originally cost $23,500, its accumulated depreciation was $19,900, and its fair value was $5,700. Campbell also paid Highway $700 in cash as part of the transaction. The transaction lacks commercial substance. What amount is the new book value for the truck Campbell received?

A. $5,700

B. $5,000

C. $3,700

D. $3,000

Question

Jaelyn Terry

Business

30 June, 15:02

Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell's truck originally cost $23,000, its accumulated depreciation was $20,000, and its fair value was $5,000. Highway's truck originally cost $23,500, its accumulated depreciation was $19,900, and its fair value was $5,700. Campbell also paid Highway $700 in cash as part of the transaction. The transaction lacks commercial substance. What amount is the new book value for the truck Campbell received?

A. $5,700

B. $5,000

C. $3,700

D. $3,000

+5

Answers (1)

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Pogo · Answer 1

Answer & Explanation:

The carrying value of the company is $3000 ($23000 - $20000) and the amount paid is $700 for the exchange of a truck worth $5700. The entry for such an exchange will be:

Dr Truck - Accumuated Depreciation $20000

Dr New Truck (Balancing amount) $3700

Cr Asset Cost $23000

Cr Cash Paid $700

So the new value that must be recognized as asset value in the Statement of Financial Position for the year is $3700.

So the option C is correct.