Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has
A) no commercial substance and additional cash is paid.
B) no commercial substance and additional cash is received.
C) commercial substance and additional cash is paid.
D) commercial substance and additional cash is received.

Question

Quizplus · Accepted Answer

When a nonmonetary exchange of plant assets has no commercial substance and additional cash is paid, accounting recognition should not be given to any gain realized. This is because the exchange does not result in a significant change in the companies' future cash flows. However, if additional cash is received, accounting recognition should be given to the portion of the gain proportional to the cash received. If the exchange has commercial substance, accounting recognition should be given to the entire gain realized, regardless of the presence or absence of additional cash exchanged.

Accounting Recognition Should Be Given to Some or All of the Gain