Cuomo Touring Company owns a luxury motor coach it uses in long-distance tours. The motor coach originally cost the company $ 685,000, and depreciation taken to date amounts to $ 274,000. Cuomo is considering several alternative methods of disposing of the motor coach and is concerned about the financial statement impact. The alternative methods of disposal available are as follows. (Treat each alternative independently.)
1. The motor coach will be sold for $ 365,000 cash.
2. The motor coach will be exchanged for a stock investment in Recreation, Ltd. The value of the stock is estimated at $ 425,000.
3. The motor coach will be traded in on a new model valued at $ 925,000. A trade-in allowance of $ 400,000 will be granted by the manufacturer with the balance paid in cash.
4. The motor coach will be traded for a limousine owned by Barton Transportation Company. In exchange for the motor coach, Barton will give Cuomo Touring $ 60,000 cash, a three-year $ 340,000 note with a face rate of 8 percent, and the limousine. The motor coach has an appraised value of $ 450,000 but fair market value of the limousine is not clear.
A. Determine the amount of gain or loss to be recognized in each of the alternatives.
B. Make the journal entries to record the events above.