Like Kind Exchange

[tcsewell3]

My business just sold a Forklift and purchased a new one with the proceeds I am wondering how to account for it.

The original cost 149,614.98 plus we replaced the engine before it was sold for a cost of 3372.01. Total basis of 152,986.99. Total depreciation up to the point of sale was 90,877.82 bring the NBV to 62,109.17. The machine eventually sold for 73,087.09 after fees and commission to the auction house. We also received $8,000 in an insurance settlement (reason why the engine was replaced). We used the 81,087.09 to buy a brand new Forklift.

A few questions:
Is this a pure exchange?
Does that mean that no gain is recognized under Financial accounting rules?
What should is the entry for the disposition of the old forklift?
Are the proceeds from insurance part of the total sales price or should they adjust the basis?

Cost=152,986.99
Dep:=(90,877.82)
NBV= 62,109.17

Sale Price: 73,087.09
Insurance: 8,000.00
Total: 81,087.09

Gain: 18, 977.92???

 

[bklynboy]

This is not a like kind exchange as that only applies when you trade one item for another. What you have done is sold one item and bought a similar item but there is no exchnage. So you get to recognize the gain form the sale and set up the book basis on the new purchase and depreciate. Refer to FAS 153 for guidance.

Disposition is proceeds less book value and includes the insurance proceeds which is a recovery of cost.