20. The Tinsley Company exchanged land that it had been holding for future plant expansion for a more suitable parcel located farther from residential areas. Tinsley carried the land at its original cost of $62,500. According to an independent appraisal, the land currently is worth $150,000. Tinsley paid $23,000 in cash to complete the transaction. Required: 1. What is the fair value of the new parcel of land received by Tinsley assuming the exchange has commercial substance? 2. Prepare the journal entry to record the exchange assuming the exchange has commercial substance. 3. Prepare the journal entry to record the exchange assuming the exchange lacks commercial substance. 4. Prepare the journal entry to record the exchange except that Tinsley received $30,000 in the exchange, and the exchange lacks commercial substance.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter12: Nonrecognition Transactions
Section: Chapter Questions
Problem 21P
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20. The Tinsley Company exchanged land that it had been holding for future plant expansion for a
more suitable parcel located farther from residential areas. Tinsley carried the land at its original cost
of $62,500. According to an independent appraisal, the land currently is worth $150,000. Tinsley paid
$23,000 in cash to complete the transaction.
Required:
1. What is the fair value of the new parcel of land received by Tinsley assuming the exchange has
commercial substance?
2. Prepare the journal entry to record the exchange assuming the exchange has commercial
substance.
3. Prepare the journal entry to record the exchange assuming the exchange lacks commercial
substance.
4. Prepare the journal entry to record the exchange except that Tinsley received $30,000 in the
exchange, and the exchange lacks commercial substance.
Transcribed Image Text:20. The Tinsley Company exchanged land that it had been holding for future plant expansion for a more suitable parcel located farther from residential areas. Tinsley carried the land at its original cost of $62,500. According to an independent appraisal, the land currently is worth $150,000. Tinsley paid $23,000 in cash to complete the transaction. Required: 1. What is the fair value of the new parcel of land received by Tinsley assuming the exchange has commercial substance? 2. Prepare the journal entry to record the exchange assuming the exchange has commercial substance. 3. Prepare the journal entry to record the exchange assuming the exchange lacks commercial substance. 4. Prepare the journal entry to record the exchange except that Tinsley received $30,000 in the exchange, and the exchange lacks commercial substance.
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