A Company Owns a Piece of Land That Originally Cost

question 61

Multiple Choice

A company owns a piece of land that originally cost $10,000 and has a fair market value of $8,000.It is exchanged along with $5,000 cash for another piece of land having a fair value of $13,000.The exchange had commercial substance.The proper journal entry to record this transaction is

• A) Land (new)........................15,000
• Land (old)......................10,000
• Cash ...........................5,000
• B) Land (new).......................13,000
• Loss on Exchange .................2,000
• Land ...........................10,000
• Cash ...........................5,000
• C) Land (new)........................18,000
• Land (old).....................10,000
• Cash ...........................5,000
• Gain on Exchange ...............3,000
• D) Land (new)........................13,000
• Retained Earnings ................2,000
• Land (old)......................10,000
• Cash ...........................5,000

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Definitions:

Capital Balances

The amount of equity each partner or shareholder has in an enterprise, often represented as their ownership stake.