How
would the transaction in BE23-11 be recorded if it were arm's-length?
In
BE Textile manufacturer Peterson Corp. exchanges computer software having a
carrying amount of $11,000 with the real estate company Frederick Corp. The
software that is received in exchange from Frederick Corp. has a carrying
amount of $15,100, performs different functions, and has a fair value of
$20,800. Both companies are 100% owned by the same individual and since they
are closely held companies they both follow
This transaction is a non-monetary exchange. Since the
software packages perform different functions the transaction would be
considered to have commercial substance. The transaction would therefore be
measured at the exchange amount.
Peterson
Corp.
Computer software (new)................... 20,800
Computer
Software (old).............. 11,000
Gain on
disposal of software......... 9,800
Frederick
Corp.
Computer software (new)................... 20,800
Computer
Software (old).............. 15,100
Gain on
disposal of software......... 5,700
