[vodrldnr]

I found this both Wiley and Becker:

Vik Auto and King Clothier exchanged goods, held for resale, with equal fair values. Each will use the other’s goods to promote their own products. The retail price of the car that Vik gave up is less than the retail price of the clothes received. What profit should Vik recognize for the nonmonetary exchange?

a. A profit is not recognized.

b. A profit equal to the difference between the retail prices of the clothes received and the car.

c. A profit equal to the difference between the retail price and the cost of the car.

d. A profit equal to the difference between the fair value and the cost of the car.

Answer is D. Now why would this exchange NOT be an exchange to facilitate a sale to a customer? Can someone explain this?

[inviteyou]

This was tricky for me at first. I think the key is that promoting their own products implies there's future cash flows will occur as a result of the transaction. Vik would recognize the gain or the difference between FV and the BV of the asset giving up.

[DocJ]

Honestly, I think the exam will tell you whether or not something facilitates a sale to a customer. If it doesn't explicitly say so or provide evidence that loudly and clearly says so, then just assume it doesn't. Yeah, I know getting clothes might mean you're gonna sell them to customers. But for all you know, maybe they're uniforms for employees.

Unless a question actually says so, never assume anything.

[Author]

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