Beeman Company exchanged machinery with an appraised value of $292,500, a record

Question

Beeman Company exchanged machinery with an appraised value of $292,500, a recorded cost of $450,000 and accumulated depreciation of $225,000 with Lacey Corporation for machinery Lacey owns. Lacey’s machinery has an appraised value of $282,500, a recorded cost of $540,000, and accumulated depreciation of $297,000. Lacey also gave Beeman $10,000 cash in the exchange. Assume depreciation has already been updated. (14 points) Assuming the exchange lacked commercial substance, record entries for both companies.

Explanation / Answer

Compute the gain Cost 450000 Less: Accumulated depreciation -225000 Book Value 225000 Fair value 292500 Gain on exchange 67500 Date Account Title and explanation Debit($) Credit($) Machinery 282500 Cash 10000 Accumulated Depreciation 225000             Gain on exchange 67500             Machinery 450000 Compute the gain Cost 540000 Less: Accumulated depreciation -297000 Book Value 243000 Fair value 282500 Gain on exchange 39500 Date Account Title and explanation Debit($) Credit($) Machinery 326500 Cash 10000 Accumulated Depreciation 297000             Gain on exchange 39500             Machinery 540000

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