During the Current Year,Ethel Exchanges a Machine for Another Machine

question 57

Essay

During the current year,Ethel exchanges a machine for another machine in a like-kind exchange.Ethel's adjusted basis in the machine given up is $7,000,and she receives a machine worth $13,000 plus $3,000 cash.
a.Calculate the amount of gain realized by Ethel on the exchange.
b.Calculate the amount of the gain that must be recognized by Ethel on the transaction.
c.Calculate Ethel's basis in the new machine.

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Definitions:

Processing Department

A division within a factory where a specific type of production activity or process takes place.

Work in Process

Inventory category referring to goods that are in the process of being manufactured but are not yet completed.

Process Costing

Process costing is a method of assigning production costs to units of output in industries where the products are indistinguishable from each other and produced in a continuous process.

Weighted-Average Method

An inventory costing method that assigns an average cost to each unit of inventory, factoring in both the cost and quantity of goods available.