Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available: DenverBristolCost$100,000$55,500Accumulated depreciation52,00023,000Fair value43,00043,000 Required:1.Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.2.Assuming the exchange does not have commercial substance, prepare journal entries for Denver and Bristol to record the exchange.

Loss on exchange=Warehouse(old)-Accumulated depreciation-Fair value=$100,000-$52,000-$43,000=$5,000

Answered: Two independent companies, Denver and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available:

	Denver	Bristol
Cost	$100,000	$55,500
Accumulated depreciation	52,000	23,000
Fair value	43,000	43,000

Required:

1.	Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.
2.	Assuming the exchange does not have commercial substance, prepare journal entries for Denver and Bristol to record the exchange.

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