Coco Services Exchanged an Asset with Fair Value of $12,000

question 49

Multiple Choice

Coco Services exchanged an asset with fair value of $12,000 and a cost of $24,000 now 40% depreciated) for a nonmonetary asset with a fair value of $12,000. In addition, Coco received $2,000 boot. In the entry to record this exchange, Coco should record

• A) a $400 loss.
• B) a $400 gain.
• C) no gain or loss.
• D) a $2,400 loss.

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Definitions:

Payback Cutoff

The maximum allowable period for an investment to recoup its initial cost, beyond which it is not considered.

NPV

Net Present Value; a calculation used to determine the present value of a series of future cash flows, less the initial investment.

Conventional Cash Flow

A pattern of cash flow over time where an initial outlay is followed by a series of positive cash inflows.

Cash Flows

The entirety of cash and cash-equivalent assets being moved into and exiting a company.