The asset acquired is recorded at the fair value of

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The asset acquired is recorded at the fair value of the consideration given or the fair value of the asset acquired, whichever is more clearly evident.
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10-16 Issuance of Equity Securities Asset acquired is recorded at the fair value of the asset or the market value of the securities , whichever is more clearly evident. If the securities are actively traded, market value can be easily determined. If the securities given are not actively traded, the fair value of the asset received, as determined by appraisal, may be more clearly evident than the fair value of the securities. Donated Assets On occasion, companies acquire assets through donation. The receiving company is required to record The donated asset at fair value. Revenue equal to the fair value of the donated asset.
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10-17 U.S. GAAP vs. IFRS Fair value of donated assets granted by a governmental unit is recorded as revenue. Donated assets from a governmental unit are accounted for at fair value, but not recorded as revenue. Two alternatives: Deduct the fair value amount to determine the initial cost of the asset. Record the grant as deferred income (a liability) and recognize it as income over the asset’s useful life. Government Grants
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10-18 Dispositions Update depreciation or amortization to date of disposal. Remove original cost of asset and accumulated depreciation or amortization from the books. The difference between book value of the asset and the amount received is recorded as a gain or loss . On June 30, 2013, MeLo Inc. sold equipment for $6,350 cash. The equipment was purchased on January 1, 2008, at a cost of $15,000. The equipment was depreciated using the straight-line method over an estimated 10-year life with zero residual value. MeLo last recorded depreciation on the equipment on December 31, 2012, its year-end. Prepare the journal entries necessary to record the disposition of this equipment.
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10-19 Update depreciation to date of sale. Dispositions June 30, 2013: Depreciation expense ($15,000 ÷ 10 years) × ½) ....... 750 Accumulated depreciation ……………… ........ 750 To update depreciation to date of sale. Remove original asset cost and accumulated depreciation. Record the gain or loss . June 30, 2013: Accumulated depreciation ............................................ 8,250 Cash ………………………….…………… ...................... 6,350 Loss on sale …………………………………………….… 400 Equipment ………………………… ............... 15,000 To record sale of equipment. ($15,000 ÷ 10 years) × 5½) = $8,250
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10-20 Exchanges General Valuation Principle: Cost of asset acquired is: fair value of asset given up plus cash paid or minus cash received or fair value of asset acquired, if it is more clearly evident In the exchange of assets fair value is used except in rare situations in which the fair value cannot be determined or the exchange lacks commercial substance .
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