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Problem Example

Erwing Company exchanged an old packaging machine originally costing P1,200,000 that was 50% depreciated, for a used machine and paid P160,000 difference; the fair value of the old machine was P700,000. The cost of the new machine was P860,000 and the gain on exchange was P100,000.

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Allyza Magtibay
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10K views1 page

Problem Example

Erwing Company exchanged an old packaging machine originally costing P1,200,000 that was 50% depreciated, for a used machine and paid P160,000 difference; the fair value of the old machine was P700,000. The cost of the new machine was P860,000 and the gain on exchange was P100,000.

Uploaded by

Allyza Magtibay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Problem Statement and Solution Overview

During the current year, Erwing Company exchanged an old packing machine, which cost P1, 200, 000

and was 50% depreciated, for another used machine and paid a cash difference of P160, 000. The fair
value of the old packaging machine was determined to be P700, 000.

1) What is the cost of the machine acquired in the exchange?


a) 860, 000
b) 700, 000
c) 760, 000
d) 540, 000
My Solution:
Fair value of the old packaging machine P700, 000
Cash paid 160, 000
Cost of the machine acquired P860, 000

2) What is the gain on exchange?


a) 540, 000
b) 100, 000
c) 60, 000
d) 0

My Solution:

Fair value of the old Packaging machine P 700, 000

CA- (1, 200, 000× 50%) (600, 000)

Gain on exchange P 100, 000

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