1.
Concept Introduction: Disposals of plant assets occur in three basic ways that are discarding, selling, and exchanging. When property plant and equipment are exchanged, it is first required to ascertain if the exchange has commercial substance. If there is commercial substance, gain or loss on the exchange must be recognized.
The entry for exchange assuming C Co paid $30,000 cash and the exchange has commercial substance.
2.
Concept Introduction: Disposals of plant assets of plant asset occur in three basic ways that are discarding, selling, and exchanging. When property plant and equipment are exchanged, it is first required to ascertain if the exchange has commercial substance. If there is commercial substance, gain or loss on the exchange must be recognized.
The entry for exchange assuming C Co paid $22,000 cash and the exchange has commercial substance.
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Chapter 10 Solutions
FUND ACCOUNTING PRINCIPLES CONNECT
- 28 Assume that Abdul Baari LLC acquiring a new truck for OMR 45000. In exchange, the company pays OMR 32000 cash and old truck. The old truck originally cost OMR 40000 and has accumulated depreciation of OMR 25,000, which implies a OMR 15,000 book value at the time of exchange. From the following given options identify the correct journal entry for profit or loss on exchange of old truck with new truck. a. Dr New Truck A/c OMR 45000 Dr Loss on exchange of truck OMR 2000 Dr Accumulated depreciation on old Truck OMR 25000 and Cr cash A/c 32000 Cr Old Truck A/C OMR 40000 b. Dr New Truck A/C OMR 47000 and Cr Cash A/c 32000 Cr Old truck A/c 15000 c. Dr New Truck A/C OMR 45000 Dr Loss on exchange of old Truck OMR 2000 and cash A/c 32000 Cr old Truck A/c OMR 15000 d. None of the given optionsarrow_forwardQ A company exchanged old equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively. Assuming that the exchange lacks commercial substance, the company would record a gain(loss) on exchange of assets in the amount of: Multiple Choice $8,000. ($8,000). $26,000. $0.arrow_forwardRecording Asset Exchanges Minneapolis Inc. has equipment with an original cost of $52,500 and accumulated depreciation of $30,000. This equipment was traded in for new equipment with a list price of $60,000. The new machine can be purchased without a trade-in for $56,250 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash. Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $37,500 cash is paid. c. The same as in part b except that the transaction lacks commercial substance. a. Account Name Dr. Cr. AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note…arrow_forward
- Recording an Asset Exchange Science Center trades an electron microscope with an original cost of $480,000 and accumulated depreciation of $192,000 for new optical equipment. The old equipment has a fair market value of $384,000 at trade-in time, and Science Center receives $72,000 cash on the trade-in. The transaction lacks commercial substance. Prepare the entry for Science Center to record the exchange. Note: Round your answers to the nearest whole number. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). Account Name Dr. Cr. Cash Answer Answer Equipment (new) Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution…arrow_forwardRecording Asset Exchanges Minneapolis Inc. has equipment with an original cost of $52,500 and accumulated depreciation of $30,000. This equipment was traded in for new equipment with a list price of $60,000. The new machine can be purchased without a trade-in for $56,250 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash. Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $37,500 cash is paid. c. The same as in part b except that the transaction lacks commercial substance. a. Account Name Dr. Cr. Answer Answer b. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer Answer Answer C. Account Name Dr. Cr. Answer…arrow_forwardMaxim Company exchanged a used machine with a book value of $26,000 (cost $54,000 less $28,000 accumulated depreciation) and cash of $8,000 for a delivery truck. The machine has a estimated fair market of $36,000. The transaction has commercial substance. Regarding the journal entry to record the exchange, what value will be assigned to the delivery truck? O 36,000 O 44,000 O 54,000 O 34,000 Question 17 The cost of training employees to operate newly acquired machinery are usually capitalized as part of the acquisition value of the asset. O Truearrow_forward
- Caleb Company owns a machine that had cost $46,000 with accumulated depreciation of $20,200. Caleb exchanges the machine for a newer model that has a market value of $56,000. Record the exchange assuming Caleb paid $31,800 cash and the exchange has commercial substance. Record the exchange assuming Caleb paid $23,800 cash and the exchange has commercial substance.arrow_forwardProblem 2 Fixed Asset Theory. Assume that at 1/1/x1 P company sells a piece of equipment to S for $900,000. At the time of the sale, the asset was recorded on P's books as follows: Original Cost -AD NBV $600,000 -$200,000 $400,000 The asset has a 3 year remaining life. 1) How much would be the excess depreciation? 2) What would be the correct depreciation expense for 19x1 3) What would be the correct consolidated asset cost at 12/31/x1 4) What would be the corrected accumulated depreciation at 12/31/x2 Please provide the two consolidation journal entries at 12/31/x2:arrow_forwarde amortization Intangible Assets 457 PROBLEM 3: EXERCISES 1. Big Publisher Co. has a publishing contract with Mr. Juan Lapis. An intangible asset for the publishing title is recognized on the contract. The carrying amount is P4,400,000. Bigger Publisher Co. has a similar publishing contract with Ms. Jane Ballpen. The carrying amount is P4,200,000. Big traded the publishing title with Lapis to Bigger for that of Ballpen. The fair value of each contract was P4,500,000. Requirement: Provide the entries in each of Big and Bigger's books under each of the following scenarios: a. The exchange transaction lacks commercial substance. b. The exchange transaction has commercial substance. (Adapted) 2. Coffee Co. incurred P5,000,000 on a self-created computer software, P2,100,000 of which was incurred after technological feasibility was established. The software is expected to have a 3-year economic life and generate future revenues of P35,000,000. The revenue generated by the software during the…arrow_forward
- E10-12 Exchange of Assets Goodman Company acquired a truck from Harmes Company in exchange for a machine. The exchange is determined to have commercial substance. The machine cost $30,000, has a book value of $6,000, and has a market value of $9,000. The truck has a cost of $12,000 and a book value of $8,000 on Harmes’ books. Required: Prepare journal entries for Goodman and Harmes to record the exchange.arrow_forwardRecording Asset Exchanges Minneapolis Inc. has equipment with an original cost of $84,000 and accumulated depreciation of $48,000. This equipment was traded in for new equipment with a list price of $96,000. The new machine can be purchased without a trade-in for $90,000 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash. Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $60,000 cash is paid. c. The same as in part b except that the transaction lacks commercial substance. a. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer b. Account Name Dr. Cr. Equipment (new) Answer Answer Accumulated Depreciation Answer Answer Answer Answer Answer Answer Answer Answer Equipment (old) Answer…arrow_forwardPROBLEM 1 On August 1, Barreto Company exchanged a machine for a similar machine owned by Blakey Company and also paid $7,000 cash to Blakey Company. Barreto's machine cost $85,000 when originally purchased and has accumulated depreciation to date of $25,000 and a fair market value of $55,000. Blakey's machine originally cost $96,000 and has accumulated depreciation to date of $42,000 and a fair value of $62,000. Prepare the necessary journal entries for Barreto Company and Blakey Company to record this transaction assuming commercial substance.arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College