You have two clients that are considering trading machinery with each other. Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance Your clients would prefer that the exchange be deemed to have commercial substance, to allow them to record gains. Here are the facts: Client A Client B Original cost $104,000 $149,800 Accumulated depreciation 38,300 79,500 Fair value 88,100 110,500 Cash received (paid) (22,400 ) 22,400 (a) Record the trade-in on Client A's books assuming the exchange has commercial substance. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

You have two clients that are considering trading machinery with each other. Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance Your clients would prefer that the exchange be deemed to have commercial substance, to allow them to record gains. Here are the facts: Client A Client B Original cost $104,000 $149,800 Accumulated depreciation 38,300 79,500 Fair value 88,100 110,500 Cash received (paid) (22,400 ) 22,400 (a) Record the trade-in on Client A's books assuming the exchange has commercial substance. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA1: International Financial Reporting Standards

Section: Chapter Questions

Problem 9MCQ

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Similar questions

Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will Group of answer choices A) be reported in the Other Revenues and Gains section of the income statement. B) effectively reduce the amount to be recorded as the cost of the new asset. C) effectively increase the amount to be recorded as the cost of the new asset. D) be credited directly to the owner's capital account.
Winn Company exchanged an old machine having a carrying amount of P16,800, and paid a cash difference of P6,000 for a new machine having a total cash price of P20,500. The cash flows from the new machine are expected to be significantly different than the cash flows from the old machine. What amount of loss should Winn recognize on this exchange?
CAKE Corporation exchanged a piece of equipment for new equipment. Data pertaining to the old equipment follows: Cost-P500,000; Accumulated Depreciation, P300,000; Fair value of old equipment, P180,000. The fair value of the new equipment is P230,000 and CAKE Corporation paid P50,000 to complete the exchange transaction. Assuming the configuration of the cash flows of the equipment is significantly different, how much is the gain or loss on exchange?
The old equipment has an original cost of P1,500,000, accumulated depreciation of P600,000, and fair value of P1,000,000. The new equipment obtained through exchange has a fair value of P1,200,000. The balance was settled with cash. The exchange will not affect the future cashflows of the entity. How much should be recorded as the PURCHASE PRICE of the equipment?
Tainan company decides to exchange its old machine and $2,600,000 cash for a new machine. The old machine has a book value of $1,400,000 and a fair value of $2,400,000 on the date of the exchange. If this transaction has commercial substance, the cost of the new machine would be recorded at a.$5,000,000. b.$4,000,000. c.$2,600,000. d.cannot be determined.
Alvarez and Reymond, both NGAs, exchanged their equipment. Relevant data is presented below Alvarez Reymond Carrying amount 85,000 130,000 Fair value 95,000 115,000 Cash paid by Alvarez to Reymond 15,000 How much is the initial measurement of the equipment received by Reymond if the exchange has a commercial substance? Refer to the previous question, how much is the gain (loss) recognized by Reymond?
On july 1, 2021, PAOLO exchanged its-non-monetary asset (equipment) with YEN's non-monetary asset (machinery). the following data were made available: PAOLO: Equipment P4,400,000 accumulated depreciation 2,000,000 cash received from gerald 3,000,000 YEN: Machinery P3,700,000 Accumulated depreiation 1,800,000 Fair value of the machinery 2,100,000 The exchange has significantly changed the cash flows of each entity. How much is the cost of the new asset of PAOLO?
Hoyle Company traded machinery with a book value of $680,000 and a fair value of $720,000. In exchange, it received a machine with a fair value of $800,000. Hoyle also paid cash of $80,000 in the exchange. What amount of gain or loss should Hoyle recognize on the exchange (assuming the exchange lacks commercial substance)? Hart Corporation owns machinery with a book value of $570,000. It is estimated that the machinery will generate future cash flows of $600,000. The machinery currently has a fair value of $420,000. How much asset impairment loss should Hart recognize?
Gunther Co. and Central Perk Coffee House, Inc. have an exchange that lacks commercial substance. The following information is noted regarding the assets involved in the transaction: Gunther Co. Central Perk Coffee House, Inc. Book Value $720,000 $1,140,000 Fair Value 1,200,000 1,080,000 Cash Paid - 120,000 Cash Received 120,000 - What amount should Gunther Co. record for the asset received? a. $600,000 b. $648,000 c. $1,200,000 d. $1,080,000
Please explain aboug your asnwer. Sheridan Corp. exchanged similar pieces of equipment with Elongo Corp. No cash was exchanged. Since this exchange will not significantly change the economic position of either company, this transaction lacks commercial substance. At this time, the carrying amount of Sheridan's asset is $37300, while the carrying amount of Elongo’s asset on their books is $33500. However, it has been reliably determined that the fair value of Sheridan’s asset is $37500, while the fair value of Elongo’s asset is $36800. Given these facts, at what amount should Sheridan record the asset it receives from Elongo? $37300 $36800 $37500 $33500
Grabrille Inc. and Lucy Company have an exchange with no commercial substance. The asset given up by Gabrille has a book value of P120,000 and a fair value of P135,000. The asset given up by Lucy has a book value of P220,000 and a fair value of P200,000. Cash of P65,000 is received by Lucy. What amount should Gabrille record for the asset received? a. 200,000 b. 110,000 c. 185,000 d. 135,000
Hartney Company and Indoy Company had an exchange of productive assets. Hartney Company exchanges a building for Indoy's equipment. The following information are as follows: Hartney (Machine) Indoy (Equipment) Cost of asset exchanged P900,000 P800,000 Accumulated depreciation 540,000 320,000 Fair value of asset exchanged 400,000 350,000 Cash received (paid) 50,000 (50,000) Assuming that the transaction has a commercial substance, how much should Indoy recognize gain/loss in the exchange? (Note: Indicate "( )" if loss)