1. Asset Exchanges Accounting Issues: Dr. Wallace R. Leese, Ph.D. 1.At what value should the asset received be recorded? 2.Should a gain or loss be recognized on the exchange of the assets? Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

2. Asset Exchanges Sample Problem #1 Dr. Wallace R. Leese, Ph.D. Adams Mining Co. traded a rare, 1913 antique truck (specially equipped for mining during that era), for an patent with Gemstone Industries. Adams had $150,000 invested in the truck, with accumulated depreciation of $90,000. Gemstone had $20,000 in capitalized costs for the patent, along with $2,000 in amortization. Neither Adams nor Gemstone were able to reasonably determine the FMV of either of these two items. Required: Record the transaction for both Adams and Gemstone. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

3. Asset Exchanges Answer to Problem #1 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

4. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 1

5. Asset Exchanges Sample Problem #2 Bain Media Services traded a printing press for a parcel of land held by Pitt Development. The land was appraised at $150,000. Pitt had the land recorded at $90,000 on their books. Bain paid $240,000 for the press 5-years ago, and has accumulated depreciation in the amount of $80,000. Required: Record the transaction for both Bain and Pitt. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

6. Asset Exchanges General Procedures 1.Remove old asset from books 2.Record new asset at FMV 3.Record any cash paid or received 4.Record any gain or loss Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

7. Asset Exchanges Determining Gain or Loss Example: You trade a car with a BV of $15,000 for another car with a FMV of $25,000. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

8. Asset Exchanges Answer to Problem #2 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

9. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 2 1

10. Asset Exchanges Sample Problem #3 Stone Transportation arranged to trade a delivery pickup for a newer custom pickup with ABC Tire Company. The CEO of Stone Transportation plans to use the pickup for personal use (as a company perquisite). Stone paid $25,000 for their pickup 3-years ago, and has accumulated depreciation in the amount of $8,000. Stone paid ABC an additional $5,000 for the newer pickup. The Newer pickup had a bluebook value of $29,000. Required: Record the transaction for Stone transportation. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

11. Asset Exchanges Answer to Problem #3 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

12. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 3 2 1

13. Asset Exchanges Similar productive assets are productive assets that are of the same general type, that perform the same function or that are employed in the same line of business. Dr. Wallace R. Leese, Ph.D. Productive assets are assets held for or used in the production of goods or services by the enterprise. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

14. Asset Exchanges Sample Problem #4 Trader Jim is an outdoor store—primarily clothing. Trader Jim arranged to swap some of its outdoor clothing inventory for some uniforms with Scott’s Uniform Supply Company. The uniforms will be issued to employees as standard company attire. The clothing inventory exchanged cost $1,800, has a replacement value of $2,500 and could have been sold for $3,000. Scott’s Uniforms intended to use the outdoor clothing in another line of business. Scott’s cost for the uniforms was $2,000. Required: Record the transaction for Trader Jim and Scott’s Uniforms. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

15. Asset Exchanges Answer to Problem #4 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

16. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return The asset received must be held for sale in the same line of business. 2 3 2 4 1

17. Asset Exchanges Sample Problem #5 Webber Electric sells industrial electrical components to local industrial manufacturers. Webber arranged to exchange a gasoline powered forklift for an electric-powered forklift with Jensen Electric. Webber’s gas-powered forklift had a book value of $13,000 (originally, Webber paid $25,000). Likewise, Jensen’s forklift had a book value of $12,000 and accumulated depreciation of $20,000. The electric-powered forklift has a FMV of $10,000. Required: Record the transaction for both Webber and Jensen. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

18. Asset Exchanges Answer to Problem #5 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

19. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return The asset received must be held for sale in the same line of business. 2 5 3 2 4 1

20. Asset Exchanges Sample Problem #6 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return Webber Electric sells industrial electrical components to local industrial manufacturers. Webber arranged to exchange a gasoline powered forklift for an electric-powered forklift with Jensen Electric. Webber’s gas-powered forklift had a book value of $9,000 (originally, Webber paid $25,000). Likewise, Jensen’s forklift had a book value of $12,000 and accumulated depreciation of $20,000. The electric-powered forklift has a FMV of $10,000. Required: Record the transaction for both Webber and Jensen.

21. Asset Exchanges Answer to Problem #6 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

22. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 5 3 2 4 6

23. Asset Exchanges Sample Problem #7 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return Trader Jim is an outdoor store—primarily clothing. Trader Jim arranged to swap some of its outdoor clothing inventory for similar clothes with Scott’s Outdoor & More. The clothing received by Trader Jim will be held for resale in the same line of business. Trader Jim’s inventory cost $18,000, has a replacement value of $25,000 and could have been sold for $30,000. Scott’s inventory cost was $19,000. In addition, Scott had to pay an additional $6,500 cash to complete the transaction. Required: Record the transactions for Trader Jim and Scott’s Outdoor & More.

24. Asset Exchanges Answer to Problem #7 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return Recognize all gain Recognize all losses

25. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 5 3 4 6 7

26. Asset Exchanges Sample Problem #8 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return Trader Jim is an outdoor store—primarily clothing. Trader Jim arranged to swap some of its outdoor clothing inventory for similar clothes with Scott’s Outdoor & More. The clothing received by Trader Jim will be held for resale in the same line of business. Trader Jim’s inventory cost $18,000, has a replacement value of $25,000 and could have been sold for $30,000. Scott’s inventory cost was $19,000. In addition, Scott had to pay an additional $3,500 cash to complete the transaction. Required: Record the transactions for Trader Jim and Scott’s Outdoor & More.

27. Asset Exchanges Partial Answer to Problem #8 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return Recognize partial gain Cash Paid, Defer all gains

28. Asset Exchanges Calculating Partial Gains/New Basis 1 Caution: Deferred gain is realized gain less recognized gain. Note: The remaining gain is recognized over the life of the asset through lower depreciation. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

29. Asset Exchanges Answer to Problem #8 Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

30. Asset Exchanges Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 5 3 4 6 7 8

31. Dr. Wallace R. Leese, Ph.D. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return 1 2 3 54 6 87

32. Asset Exchanges APB Opinion No. 29 Dr. Wallace R. Leese, Ph.D. Normal Procedure FMV is recognized on reciprocal nonmonetary transactions (gains/losses recognized) Exceptions to Normal Procedure Generally: Transactions recorded at BV Some monetary consideration allowed Where exceptions are applicable: 1) Held for sale products/property in exchange for products/property to be sold in the same line of business. 2) Productive assets for similar productive assets (NOTE: Exchange cannot be made for the purpose of facilitating a sale to a customer) Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return

33. Asset Exchanges Definitions Dr. Wallace R. Leese, Ph.D. Monetary items: Cash, claims to cash, obligations to pay cash, and other balance-sheet items that are fixed in dollar amounts. (Examples: Cash, A/R, A/P, Bonds) Nonmonetary transactions: Exchanges that involve few or no monetary items. Similar Productive Assets: Assets that are of the same general type, that perform the same function, or that are employed in the same line of business. Problems Answers Conceptual APB-29 Definitions General Procedure Determine Gain/Loss Compute Partial Gains Comprehensive Flowchart Flowchart 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 11 2 3 4 5 6 7 82345678 Return