1.
Concept Introduction:
Exchange of assets: Plant assets such as machinery, and equipment are exchanged for newer assets, accounting for the exchange of assets depends on if the exchange transaction has commercial substance. If the exchange has commercial substance, a gain or loss that is a difference in the value of the old asset and new asset is recognized.
The book value of the old tractor at the time of exchange.
2.
Concept Introduction:
Exchange of assets: Plant assets such as machinery, and equipment are exchanged for newer assets, accounting for the exchange of assets depends on if the exchange transaction has commercial substance. If the exchange has commercial substance, a gain or loss that is a difference in the value of the old asset and new asset is recognized.
The loss on exchange transaction.
C
Concept Introduction:
Exchange of assets: Plant assets such as machinery, and equipment are exchanged for newer assets, accounting for the exchange of assets depends on if the exchange transaction has commercial substance. If the exchange has commercial substance, a gain or loss that is a difference in the value of the old asset and new asset is recognized.
The amount to be recorded on the debit of asset account for the new tractor.
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Chapter 10 Solutions
FUND OF ACCT PRIN (LOOSE)+ACCESS CARD
- Q 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_forwardRequired information [The following information applies to the questions displayed below] Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $20,500 (original cost of $45,000 less accumulated depreciation of $24,500) and a fair value of $10,700. Kapono paid $37,000 cash to complete the exchange. The exchange has commercial substance. Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $585,000 and a fair value of $870,000. Kapono paid $67,000 cash to complete the exchange. The exchange has commercial substance. Required: 1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land? 2. Assume the fair value of the farmland given is $468,000 instead of $870,000. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land? 3. Assume the same facts as…arrow_forwardABC Co. traded a used equipment with a book value of P6,800 and a fair market value of P9,200 for a new similar equipment with a list price of P71,200. ABC Co. agreed to pay P52,000 in cash for the exchange in addition to giving up the used equipment. At what amount should the new equipment be recorded? * P71,200 P61,200 P58,800 None of the abovearrow_forward
- Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000 (original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid $20,000 cash to complete the exchange. The exchange has commercial substance. Required: 1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor? 2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.arrow_forwardquestion 6 Below is the information relative to an exchange of old equipment for new equipment by Ehrlich Company. Old Equipment Book Value Fair Value Cash Paid $450,000 $510,000 $90,000 The old equipment had a cost to Ehrlich of $600,000. Show your calculations of the gain or loss incurred on the exchange. 1. Prepare the journal entry for Ehrlich to record the exchange of the equipment assuming the exchange lacks commercial substance. 2 Prepare the journal entry for Ehrlich to record the exchange of the equipment assuming the exchange has commercial substance. 3. Assume instead that the machine was sold for cash on 1/1 for $430,000. Prepare the necessary journal entry.arrow_forwardOn 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 Fair value of the Equipment 3,000,000 YEN: Machinery P3,700,000 Accumulated depreciation 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 cost of the new asset of PAOLO?arrow_forward
- Love Inc. and Life Co. have an exchange with no commercial substance. The asset given up by Love Inc. has a book value of 12,000. The asset given up by Life Co. has a book value of 20,000. Cash of 4,000 is received by Life Co. What amount should Love Inc. record for the asset received? A. 20,000 B.19,000 C.16,000 D. 23,000arrow_forwardOn 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 Fair value of the Equipment 3,000,000 YEN: Machinery P3,700,000 Accumulated depreciation 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 gain or loss on exchange for YEN?arrow_forwardAssume 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 old Truck OMR 2000 and cash A/c 32000 Cr old Truck A/c OMR 15000 b. None of the given options c. Dr New Truck A/C OMR 47000 and Cr Cash A/c 32000 Cr Old truck A/c 15000 d. 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 Clear my choicearrow_forward
- How much should be recorded as the purchase price of theindividual PPE items: 5. The old equipment has an original cost of P1,500,000,accumulated depreciation of P600,000, and fair value ofP1,000,000. The new equipment obtained throughexchange 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.arrow_forwardAlvarez 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?arrow_forwardPROBLEM 3 Bea Co. had a machine with a carrying amount of P450,000. Jane Co. had a delivery vehicle with a carrying amount of P300,000. Bea and Jane Co. exchanged the machine and vehicle, and Jane Co. paid an additional P90,000 cash as part of the exchange. Assume that the fair value of the delivery vehicle is P420,000. The exchange has commercial substance. Required 1. How much gain or loss should be recorded by Bea Co? 2. How much gain or loss should be recorded by Jane Co.?arrow_forward
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