Holyfield Corporation wishes to exchange a machine used in its operations. Holyf

Question

Holyfield Corporation wishes to exchange a machine used in its operations. Holyfield has received the following offers from other companies in the industry.

In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay $144,429 in addition to trading in its old machine.

Holyfield

Dorsett

Winston

Liston

Greeley

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

1

Holyfield Corporation

Dorsett Company

2

Holyfield Corporation

Winston Company

3

Holyfield Corporation

Liston Company

4

Holyfield Corporation

Greeley Company

(To record exchange of inventory)

(To record cost of inventory)

1. Dorsett Company offered to exchange a similar machine plus $35,719. (The exchange has commercial substance for both parties.) 2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.) 3. Liston Company offered to exchange a similar machine, but wanted $4,659 in addition to Holyfield’s machine. (The exchange has commercial substance for both parties.)

Explanation / Answer

Situation No. 1

Holyfield corporation

Dorsett company

Book value of machinery

$155,300

$116,475

Fair value

$142,876

$107,157

Gain/(loss) on disposal of machinery

($12,424)

($9,318)

Journal entry in books of Holyfield Corporation

Cash

$35,719

Machinery

$107,157

Accumulated Depreciation

$93,180

Loss on disposal of machinery

$12,424

Machinery

$248,480

Journal entry in books of Dorsett Company

Machinery

$142,876

Accumulated Depreciation

$69,885

Loss on disposal of machinery

$9,318

Cash

$35,719

Machinery

$186,360

Situation No. 2

Journal entry in books of Holyfield Corporation

Machinery

$142,876

Accumulated Depreciation

$93,180

Loss on disposal of machinery

$12,424

Machinery

$248,480

Journal entry in books of Winston Company

Machinery

$125,793

Accumulated Depreciation

$110,263

Machinery

$236,056

                               

Situation No. 3

Journal entry in books of Holyfield Corporation

Machinery

$147,535

Accumulated Depreciation

$93,180

Loss on disposal of machinery

$12,424

Cash

$4,659

Machinery

$248,480

Journal entry in books of Liston Company

Machinery

$142,876

Accumulated Depreciation

$116,475

Cash

$4,659

Gain on disposal of machinery

$15,530

Machinery

$248,480

Situation No. 4

Journal entry in books of Holyfield Corporation

Machinery

$287,305

Accumulated Depreciation

$93,180

Loss on disposal of machinery

$12,424

Cash

$144,429

Machinery

$248,480

Journal entry in books of Greeley Corporation

Cash

$144,429

Used machine inventory

$142,876

Sales

$287,305

                               

Cost of goods sold

$201,890

Machinery inventory

$201,890

Holyfield corporation

Dorsett company

Book value of machinery

$155,300

$116,475

Fair value

$142,876

$107,157

Gain/(loss) on disposal of machinery

($12,424)

($9,318)

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