Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 9, Problem 9.24EX
(A)
To determine
Exchange of fixed assets: It refers to the purchase of new fixed assets in exchange of old fixed assets. Fixed Assets refer to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue. Examples of fixed assets are Plant, Property, Equipment, Land, and Buildings.
the amount of cash given.
(B)
To determine
the gain or (loss) on the exchange of equipment.
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Item 22
Below is information relative to an exchange of similar assets by a company. Assume the exchange has commercial substance.
Old Equipment
Cash
Book Value
Fair Value
Paid
$ 49,700
$ 60,500
$ 14,100
The company would record the new equipment at:
On August 1, Crane, Inc. exchanged productive assets with Cheyenne, Inc. Crane’s asset is referred to below as “Asset A,” and Cheyenne’ is referred to as “Asset B.” The following facts pertain to these assets.
Asset A
Asset B
Original cost
$117,120
$134,200
Accumulated depreciation (to date of exchange)
48,800
57,340
Fair value at date of exchange
73,200
91,500
Cash paid by Crane, Inc.
18,300
Cash received by Cheyenne, Inc.
18,300
Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Crane, Inc. and Cheyenne, Inc. in accordance with generally accepted accounting principles.
Account Titles and Explanation
Debit
Credit
Crane, Inc.’s Books
Cheyenne, Inc.’s Books
Suppose equipment is sold for cash in an amount equal to the cost of theequipment recorded on the books. How does this sale affect the accountingequation in term of increasing or decreasing assets, liabilities or owner’s equity?
Chapter 9 Solutions
Corporate Financial Accounting
Ch. 9 - ONeil Office Supplies has a fleet of automobiles...Ch. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Distinguish between the accounting for capital...Ch. 9 - Immediately after a used truck is acquired, a new...Ch. 9 - Keyser Company purchased a machine that has a...Ch. 9 - Is it necessary for a business to use the same...Ch. 9 - A. Under what conditions is the use of an...Ch. 9 - For some of the fixed assets of a business, the...Ch. 9 - Prob. 10DQ
Ch. 9 - Straight-line depreciation A building acquired at...Ch. 9 - Units-of-activity depreciation A truck acquired at...Ch. 9 - Double-declining-balance depreciation A building...Ch. 9 - Revision of depreciation Equipment with a cost of...Ch. 9 - Capital and revenue expenditures On February 14,...Ch. 9 - Sale of equipment Equipment was acquired at the...Ch. 9 - Prob. 9.7BECh. 9 - Prob. 9.8BECh. 9 - Costs of acquiring fixed assets Melinda Staffers...Ch. 9 - Prob. 9.2EXCh. 9 - Prob. 9.3EXCh. 9 - Prob. 9.4EXCh. 9 - Straight-line depreciation rates Convert each of...Ch. 9 - Straight-line depreciation A refrigerator used by...Ch. 9 - Depreciation by units-of-activity method A...Ch. 9 - Depreciation by units-of-activity method Prior to...Ch. 9 - Depreciation by two methods A Kubota tractor...Ch. 9 - Depreciation by two methods A storage tank...Ch. 9 - Partial-year depreciation Equipment acquired at a...Ch. 9 - Prob. 9.12EXCh. 9 - Capital and revenue expenditures Warner Freight...Ch. 9 - Prob. 9.14EXCh. 9 - Capital and revenue expenditures Quality Move...Ch. 9 - Capital expenditure and depreciation Willow Creek...Ch. 9 - Entries for sale of fixed asset Equipment acquired...Ch. 9 - Disposal of fixed asset Equipment acquired on...Ch. 9 - Prob. 9.19EXCh. 9 - Amortization entries Kleen Company acquired patent...Ch. 9 - Prob. 9.21EXCh. 9 - Balance sheet presentation List the errors you...Ch. 9 - Asset traded for similar asset A printing press...Ch. 9 - Prob. 9.24EXCh. 9 - Entries for trade of fixed asset On July 1, Twin...Ch. 9 - Entries for trade of fixed asset On October 1,...Ch. 9 - Prob. 9.1APRCh. 9 - Comparing three depreciation methods Dexter...Ch. 9 - Depreciation by three methods; partial years...Ch. 9 - Depreciation by two methods; sale of fixed asset...Ch. 9 - Prob. 9.5APRCh. 9 - Amortization and depletion entries Data related to...Ch. 9 - Allocating payments and receipts to fixed asset...Ch. 9 - Comparing three depreciation methods Waylander...Ch. 9 - Depreciation by three methods; partial years...Ch. 9 - Depreciation by two methods; sale of fixed asset...Ch. 9 - Transactions for fixed assets, including sale The...Ch. 9 - Amortization and depletion entries Data related to...Ch. 9 - Continuing Company AnalysisAmazon: Fixed asset...Ch. 9 - Prob. 9.2ADMCh. 9 - Prob. 9.3ADMCh. 9 - Comcast, Google, and Walmart: Fixed asset turnover...Ch. 9 - Prob. 9.1TIFCh. 9 - Communication Godwin Co. owns three delivery...
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Similar questions
The following information relates to an exchange of assets that has commercial substance by Brent Company.
Old Equipment
Book Value
Fair Value
Cash Paid
Case A
$75,000
$85,000
$15,000
Case B
$50,000
$45,000
$7,000
For Case B, equipment would be recorded at $Answer and Answer (gain/loss) of $Answer would also be recorded.
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A corporation uses the Indirect method of preparing the statement of cash flows. A fixed asset has been sold for $25,656, representing a
gain of $3,094. The value of this transaction appearing in the operating activities section of the statement of cash flows is
Oa. $20,750
Ob. $22,562
Oc. $25,656
Od. $(3,094)
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A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $21,376 representing a gain of $3,249. The value in the operating activities section regarding this event would be
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d.$21,376
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Ireland Airways recently reported the following items at fair value in recent annual report (in millions).
Account
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Source of Input
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Identical Asset /Active Market
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Similar Asset/Active Market
Other Available for Sale Securities
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Identical Asset/Active Market
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Significant unobservable inputs
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Identical Asset/Inactive Market
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A corporation uses the indirect method of preparing the statement of cash flows. A fixed asset has been sold for $20,609, representing a gain of $3,278. The value of this transaction appearing in the operating activities section of the statement of cash flows is
a.$17,331
b.$23,887
c.$(3,278)
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A company exchanged old equipment and $18,200 cash for similar equipment. The book value and the fair value of the old equipment were $81,000 and $91,800, respectively.
Assuming that the exchange has commercial substance, the company would record a gain(loss) of:
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Un Company sold office equipment with a cost of $42,960 and accumulated depreciation of $39,803 for $5,640.
a. what is the book value of the asset at the time of sale
b, what is the amount of gain/loss on the disposal
c. how would the sale affect net income and by how much
d. how would the sale affect the amount of total assets shown on the balance sheet
e. how would the event affect the statements of cash flows
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The following assets are exchanged between Company A and Company B:
Company A
Company B
Asset original cost
$53,400
$65,100
Accumulated depreciation
32,630
39,600
Net book value
20,770
25,500
Fair value of asset
24,200
28,600
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A fixed asset with a cost of $32,265 and accumulated depreciation of $29,039 is traded for a similar asset priced at $64,781 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,727, at what cost will the new equipment be recorded in the books?
a.$64,781
b.$27,538
c.$4,727
d.$1,501
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Statement I: In accordance with PAS 1 par. 66D, an entity shall classify an asset as current when the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Statement II: Cash equivalents are investments with original maturities of six months or less. *
1 point
a. Only statement I is correct.
b. Only statement II is correct
c. Both statements are correct
d. Both statements are incorrect
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The basis for classifying assets as current or noncurrent is conversion to cash within
Select one:
a. the operating cycle or one year, whichever is longer.
b. the accounting cycle or one year, whichever is shorter.
c. the accounting cycle or one year, whichever is longer.
d. the operating cycle or one year, whichever is shorter.
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