Skysong Limited owns a number of rental properties in Western Canada as well as a single property in Ontario. Management has decided to concentrate its business in the west and to dispose of its one property outside this area. Skysong agrees to exchange its Ontario property for a similar commercial property outside Lethbridge, Alberta, owned by Splish Brothers Limited, a company with most of its properties east of Manitoba. The two properties are almost identical in size, rentals, and operating costs. Splish Brothers agrees to the exchange but requires a cash payment of $34,000 from Skysong to balance and complete the transaction. Further information about these two properties is provided below: Carrying amounts: Building Accumulated depreciation Fair value Cash paid Skysong Ltd. Property $543,000 103,000 $440,000 $580,000 $34,000 Splish Brothers Ltd. Property $610,000 174,000 $436,000 $614,000
Skysong Limited owns a number of rental properties in Western Canada as well as a single property in Ontario. Management has decided to concentrate its business in the west and to dispose of its one property outside this area. Skysong agrees to exchange its Ontario property for a similar commercial property outside Lethbridge, Alberta, owned by Splish Brothers Limited, a company with most of its properties east of Manitoba. The two properties are almost identical in size, rentals, and operating costs. Splish Brothers agrees to the exchange but requires a cash payment of $34,000 from Skysong to balance and complete the transaction. Further information about these two properties is provided below: Carrying amounts: Building Accumulated depreciation Fair value Cash paid Skysong Ltd. Property $543,000 103,000 $440,000 $580,000 $34,000 Splish Brothers Ltd. Property $610,000 174,000 $436,000 $614,000
Chapter9: Taxation Of International Transactions
Section: Chapter Questions
Problem 21P
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Transcribed Image Text:Skysong Limited owns a number of rental properties in Western Canada as well as a single property in Ontario. Management has
decided to concentrate its business in the west and to dispose of its one property outside this area. Skysong agrees to exchange its
Ontario property for a similar commercial property outside Lethbridge, Alberta, owned by Splish Brothers Limited, a company with
most of its properties east of Manitoba. The two properties are almost identical in size, rentals, and operating costs. Splish Brothers
agrees to the exchange but requires a cash payment of $34,000 from Skysong to balance and complete the transaction. Further
information about these two properties is provided below:
Carrying amounts:
Building
Accumulated depreciation
Fair value
Cash paid.
Cash received
Skysong Ltd.
Property
$543,000
103,000
$440,000
$580,000
$34,000
Splish Brothers Ltd.
Property
$610,000
174,000
$436,000
$614,000
$34,000
Transcribed Image Text:Assume an evaluation by both Skysong and Splish Brothers management shows that there is an insignificant difference in the
configuration of future cash flows and that commercial substance is not indicated. What entry would be made by each company to
record this asset exchange? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry
is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Account Titles
Skysong Entry.
Splish Brothers Entry.
Debit
Credit
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