1.
Concept Introduction:
Disposal of plant assets: Disposal of plant asset occurs 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, and 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:
Disposal of plant assets: Disposal of plant asset occurs 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, and 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.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
FINANCIAL AND MANAGERIAL ACCTG W/ACC CRD
- Recording 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_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_forward1. Denver, Inc., exchanged land and cash of $8,000 for equipment. The land was purchased at $55,000 a few years ago and a fair value of $60,000. Prepare the journal entry to record the exchange. Assume the exchange has no commercial substance. 2. Metro Inc. trades its used machine for a new model at Denver Inc. The used machine has a book value of $8,000 (original cost of $12,000) and a fair value of $4,000. The new model lists for $15,000. Denver gives Metro a trade-in allowance of $7,000 for the used machine, $3,000 more than its fair value. Prepare a journal entry for Metro, assuming commercial substance.arrow_forward
- Recording 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_forwardBelow 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_forwardGarcia Company owns equipment that cost $84,000, with accumulated depreciation of $44,400. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $52,400 cash, (2) $39,600 cash, and (3) $34,500 cash. View transaction list Journal entry worksheet < A в с Record the sale of equipment assuming Garcia sells the equipment for $52,400 cash. Note: Enter debits before credits. Transaction 1 General Journal Debit Creditarrow_forward
- Case A. 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 ofthe new tractor?2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.arrow_forwardArca Salvage purchased equipment for $10,000. Arca recorded total depreciation of $8,000 on the equipment. Assume that Arca exchanged the old equipment for new equipment, paying $4,000 cash. The fair market value of the new equipment is $5,000. Journalize Arca's exchange of equipment. Assume this exchange has commercial substance. Let's begin by calculating the gain or loss on the exchange of equipment. (Enter a loss with a minus sign or parentheses.) Market value of assets received Less: Book value of asset exchanged Cash paid Gain or (Loss)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_forward
- Required 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. 5 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. Assume the fair value of the old tractor is $31,000 instead of $10,700. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor? Complete this question by…arrow_forwardExchanging plant assets White Corporation purchased equipment for $22,000. White recorded total depreciation of $19,000 on the equipment. On January 1, 2018, White traded in the equipment for new equipment, paying $23,230 cash. The fair market value of the new equipment is $25,100. Journalize White Corporation’s exchange of equipment. Assume the exchange had commercial substance.arrow_forwardGoodman 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 $8,500. The truck has a cost of $12,000 and a book value of $8,000 on Harmes’ books. Goodman agrees to pay $500 to complete the exchange. Required: Prepare journal entries for Goodman and Harmes to record the exchange. Prepare journal entries for Goodman and Harmes to record the exchange. Assume the exchange occurred on September 23. please only fill in the five availble lines. Thank you! GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education