Frank's Bus Lines Exchanged Four of Ford Buses for Four

question 104

Essay

Frank's Bus Lines exchanged four of Ford buses for four GM buses. The carrying value and fair value of each fleet of vehicles on the date of the exchange are as follows:
$$\begin{array} { | l | r | r | r | r | } \hline \text { Asset } & \text { Cost } & \begin{array} { c } \text { Accumulated } \\\text { Depreciation }\end{array} & \text { Carrying Value } & \text { Fair Value } \\\hline \text { Ford Buses (Assets Given Up) } & \$ 900,000 & \$ 310,000 & \$ 590,000 & \$ 620,000 \\\hline \text { GM Buses (Assets Received) } & \$ 880,000 & \$ 260,000 & \$ 620,000 & \$ 595,500 \\\hline\end{array}$$
Frank's received cash of $40,000 and the GM buses in exchange for the Ford buses. It is expected that the future cash flows of Frank's business will not change significantly as a result of this exchange.
What amount of gain would be recognized as a result of this transaction?

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Definitions:

Products

The result of multiplying two or more numbers together or items produced for consumer use.

Fractions

Numerical quantities that represent a part of a whole, typically with a numerator and denominator.

Handmade Chocolates

Chocolates crafted by hand rather than produced by machines, often involving artisan techniques.

Pounds

A unit of weight commonly used in the United States, equivalent to 16 ounces.