On August 1, Bonita, Inc. exchanged productive assets with Windsor, Inc. Bonita’s asset is referred to below as “Asset A,” and Windsor’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $ 134,400 $ 154,000 Accumulated depreciation (to date of exchange) 56,000 65,800 Fair value at date of exchange 84,000 105,000 Cash paid by Bonita, Inc. 21,000 Cash received by Windsor, Inc. 21,000 Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) BONITA INC ENTRY: WINDSOR INC ENTRY: I answered this myself but got it wrong. Can someone help me? I tried to use ASSET A & B as possible account titles and it was marked wrong. and specifics were required for the kind of depreciation (truck, machinery, building, ect) I was condused by this because all the info says is commercial. would commercial mean a building? would it mean machinery? i have no clue.... any and all help in identifying the correct accounts for the journal entries would be appreciated. check_circle Expert Answer thumb_up thumb_down Step 1 Record the exchange for both Bonita, Inc. and Windsor, Inc.: ●Bonita, Inc. Computation of gain: Book value of old machine =$134,400 - $56,000 =$78,400 Fair value of old machine =$84,000 Gain = $84,000 - $78,400 =$5,600 Entry: Debit($) Credit($) Machinery (B) 105,000 Accumulated depreciation Machinery (A) 56,000 Machinery (A) 134,400 Gain on disposal of machinery 5,600 Cash 21,000 . Step 2 ●Windsor, Inc. Computation of gain: Book value of old machine =$154,000 - $65,800 =$88,200 Fair value of old machine =$105,000 Gain = $105,000 - $88,200 =$16,800 Entry: Debit($) Credit($) Cash 21,000 Machinery (A) 84,000 Accumulated depreciation Machinery (B) 65,800 Machinery (B) 154,000 Gain on disposal of Machinery 16,800 part b) Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

On August 1, Bonita, Inc. exchanged productive assets with Windsor, Inc. Bonita’s asset is referred to below as “Asset A,” and Windsor’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $ 134,400 $ 154,000 Accumulated depreciation (to date of exchange) 56,000 65,800 Fair value at date of exchange 84,000 105,000 Cash paid by Bonita, Inc. 21,000 Cash received by Windsor, Inc. 21,000 Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) BONITA INC ENTRY: WINDSOR INC ENTRY: I answered this myself but got it wrong. Can someone help me? I tried to use ASSET A & B as possible account titles and it was marked wrong. and specifics were required for the kind of depreciation (truck, machinery, building, ect) I was condused by this because all the info says is commercial. would commercial mean a building? would it mean machinery? i have no clue.... any and all help in identifying the correct accounts for the journal entries would be appreciated. check_circle Expert Answer thumb_up thumb_down Step 1 Record the exchange for both Bonita, Inc. and Windsor, Inc.: ●Bonita, Inc. Computation of gain: Book value of old machine =$134,400 - $56,000 =$78,400 Fair value of old machine =$84,000 Gain = $84,000 - $78,400 =$5,600 Entry: Debit($) Credit($) Machinery (B) 105,000 Accumulated depreciation Machinery (A) 56,000 Machinery (A) 134,400 Gain on disposal of machinery 5,600 Cash 21,000 . Step 2 ●Windsor, Inc. Computation of gain: Book value of old machine =$154,000 - $65,800 =$88,200 Fair value of old machine =$105,000 Gain = $105,000 - $88,200 =$16,800 Entry: Debit($) Credit($) Cash 21,000 Machinery (A) 84,000 Accumulated depreciation Machinery (B) 65,800 Machinery (B) 154,000 Gain on disposal of Machinery 16,800 part b) Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter15: Property Transactions: Nontaxable Exchanges

Section: Chapter Questions

Problem 35P

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Expert Answer

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Step 1

Record the exchange for both Bonita, Inc. and Windsor, Inc.:

●Bonita, Inc.

Computation of gain:

Book value of old machine =$134,400 - $56,000 =$78,400

Fair value of old machine =$84,000

Gain = $84,000 - $78,400 =$5,600

Entry:

	Debit($)	Credit($)
Machinery (B)	105,000
Accumulated depreciation Machinery (A)	56,000
Machinery (A)		134,400
Gain on disposal of machinery		5,600
Cash		21,000

Step 2

●Windsor, Inc.

Computation of gain:

Book value of old machine =$154,000 - $65,800 =$88,200

Fair value of old machine =$105,000

Gain = $105,000 - $88,200 =$16,800

Entry:

	Debit($)	Credit($)
Cash	21,000
Machinery (A)	84,000
Accumulated depreciation Machinery (B)	65,800
Machinery (B)		154,000
Gain on disposal of Machinery		16,800

part b) Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

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	Asset A	Asset B
Original cost	$ 134,400	$ 154,000
Accumulated depreciation (to date of exchange)	56,000	65,800
Fair value at date of exchange	84,000	105,000
Cash paid by Bonita, Inc.	21,000
Cash received by Windsor, Inc.		21,000