Question

9. When an exchange of inventory items between an enterprise and another entity is undertaken to serve the needs of the enterprise’s customers, the enterprise should record the inventory items received based on the

A) Carrying amount of the inventory items relinquished.

B) Fair value of the inventory items relinquished.

C) Carrying amount of the inventory items received.

D) Fair value of the inventory items received.

After you make your choice, tell me what theory you are basing your answer on, or what part of the codification applies to the question. explain the answer why?

Answer 1

Ans : B

The exchange of inventory items between an enterprise and another entity is undertaken to serve the needs of the enterprise’s customers is a non monetary Transaction.

As per Financial Accounting Standard Board, APB 29: Accounting for Nonmonetary Transactions, the cost of a nonmonetary asset acquired in exchange of nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss should be recognized on the exchange.