A&E Company exchanged asset A to acquire asset B from PVP Company. PVP paid $60,
ID: 2378840 • Letter: A
Question
A&E Company exchanged asset A to acquire asset B from PVP Company. PVP paid $60,000 cash to A&E in this exchange. The following information pertains to the exchange:
A&E
Asset A
PVP
Asset B
Cost
$2,700,000
$3,240,000
Accumulated depreciation
1,350,000
1,782,000
Fair market value
1,755,000
1,695,000
Cash given by PVP
------
60,000
Prepare journal entries using the answer sheet provided to record the exchange on the books of A&E company assuming the exchange lacks commercial substance:
A&E
Asset A
PVP
Asset B
Cost
$2,700,000
$3,240,000
Accumulated depreciation
1,350,000
1,782,000
Fair market value
1,755,000
1,695,000
Cash given by PVP
------
60,000
Explanation / Answer
Asset B Dr. 1695000
Cash Dr. 60000
Asset A cr. 1755000
(Being asset a exchanged for asset b and balance paid in cash.)
(1755000-1695000=60000)
Journal of A
Asset A Dr. 2700000
Accumulated Depreciation Dr. 1350000
asset A Cr. 1755000
Journal of B
Asset B Dr. 3240000
Accumulated depreciation Dr. 1782000
Asset B. Cr. 1695000
Company A
Cash Dr. 60000
PVP cr. 60000
Company B
A&E Dr. 60000
Cash Cr. 60000
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