AC 550 Project 3 Assumptions Made for Calculation (Formulae) • Commercial substance: Recognize gain or loss. • Cost of asset received = fair value of asset surrendered + cash paid – cash received. • No Commercial substance: No gain or loss recognized. • Cost of asset received = net carrying value of asset surrendered + cash paid – cash received. Smith Land Exchanged Jones Land Exchanged Cost $270,000 $280,000 Fair Value $300,000 $264,000 Cash Paid Not Applicable $36,000 Journal Entries Made for Land Exchange Assuming Commercial Substance
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