Horngren's Financial & Managerial Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (5th Edition) (miller-nobles Et Al., The Horngren Accounting Series)
5th Edition
ISBN: 9780134077345
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 9, Problem 9.16SE
To determine
Exchange of plant assets: It refers to the purchase of new plant assets in exchange of old plant assets.
Commercial substance: It means that the exchange of the plant asset cause changes in the future cash flows as more revenue will generate from the new plant asset due to an increase in its productivity. Thus, if the revenue earned or expenses incurred changes in the future due to the exchange of plant assets, then it will be referred as the exchange has a commercial substance.
To Journalize: the exchange of Equipment of O Incorporation
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Exchanging 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.
Arca 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)
On September 3, 2024, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows:
Robers’ Asset
Phifer’s Asset
Original cost
$ 215,000
$ 235,000
Accumulated depreciation
131,000
139,000
Fair value
103,500
79,500
To equalize the exchange, Phifer paid Robers $24,000 in cash.
Required:
Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (5th Edition) (miller-nobles Et Al., The Horngren Accounting Series)
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