Karlene Company and Erika Company are fuel oil disti ers. To facilitate the delivery of oil to customers, the two entities exchanged ownership of barrels of oil without physically moving the oil. Karlene paid Erika P1,500,000 to compensate for a difference in the grade of oil. It was reliably determined that the configuration of the cash flows of the asset received does not differ from the configuration of the cash flows of the asset transferred. On the date of exchange, the oil inventory of Karlene has a carrying amount of P5,000,000 and fair value of P7,000,000. The oil inventory of Erika has a carrying amount of P6,000,000 and fair value of P8,500,000. What amount should Karlene record as cost of the oil inventory receive in exchange? A. 4,500,000 B. 6,500,000 7000 000

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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. Karlene Company and Erika Company are fuel oil distributers. To facilitate the delivery of oil to customers, the two
entities exchanged ownership of barrels of oil without physically moving the oil. Karlene paid Erika P1,500,000 to
compensate for a difference in the grade of oil. It was reliably determined that the configuration of the cash flows of
the asset received does not differ from the configuration of the cash flows of the asset transferred. On the date of
exchange, the oil inventory of Karlene has a carrying amount of P5,000,000 and fair value of P7,000,000. The oil
inventory of Erika has a carrying amount of P6,000,000 and fair value of P8,500,000. What amount should Karlene
record as cost of the oil inventory receive in exchange?
A. 4,500,000
B. 6,500,000
C. 7,000,000
D. 8,500,000
Transcribed Image Text:. Karlene Company and Erika Company are fuel oil distributers. To facilitate the delivery of oil to customers, the two entities exchanged ownership of barrels of oil without physically moving the oil. Karlene paid Erika P1,500,000 to compensate for a difference in the grade of oil. It was reliably determined that the configuration of the cash flows of the asset received does not differ from the configuration of the cash flows of the asset transferred. On the date of exchange, the oil inventory of Karlene has a carrying amount of P5,000,000 and fair value of P7,000,000. The oil inventory of Erika has a carrying amount of P6,000,000 and fair value of P8,500,000. What amount should Karlene record as cost of the oil inventory receive in exchange? A. 4,500,000 B. 6,500,000 C. 7,000,000 D. 8,500,000
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