Yola Co. and Zaro Co. are fuel oil distributors. To facilitate the delivery of oil to their customers, Yola and Zaro exchanged ownership of 1,200 barrels of oil without physically moving the oil. Yola paid Zaro $30,000 to compensate for a difference in the grade of oil. On the date of the exchange, cost and market values of the oil were as follows:
|Yola Co.||Zero Co.|
In Zaro's income statement, what amount of gain should be reported from the exchange of the oil?
- $ 4,800
30000 compensation / 150000 Market value of Zero oil
0.2 x (150000 - 126000)<-- potential gain = 4800