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.

1. Dorsett Company offered to exchange a similar machine plus $36,156. (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 $4,716 in addition to Holyfield’s machine. (The exchange has commercial substance for both parties.)

In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay $146,196 in addition to trading in its old machine.

                      Holyfield       Dorsett     Winston       Liston       Greeley

Machine cost $251,520      $188,640    $238,944    $251,520    $204,360

Accum dep   94,320            70,740       111,612       117,900         –0–  

Fair value      144,624         108,468       144,624      149,340       290,820

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)

Explanation / Answer

Answer 1. Holyfield Corporation Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          108,468 Accumulated Dep                                  Dr.            94,320 Loss on Exchange                                   Dr.            84,888 To Machinery - Old          251,520 To Cash            36,156 (Record the exchange of Machinery) Loss on Exchange of Machinery = (251520 - 94320) - 108468 + 36156 = $84888. Dorsett Company Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          144,624 Cash                                                             Dr.            36,156 Accumulated Dep                                  Dr.            70,740 To Machinery - Old          188,640 To Profit on exchange            62,880 (Record the exchange of Machinery) Profit on Exchange of Machinery = 144624 + 36156 - (188640 - 70740) = 62880 Answer 2. Holyfield Corporation Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          144,624 Accumulated Dep                                  Dr.            94,320 Loss on Exchange                                   Dr.            12,576 To Machinery - Old          251,520 (Record the exchange of Machinery) Loss on Exchange of Machinery = (251520 - 94320) - 144624 = $12576. Winston Company Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          144,624 Accumulated Dep                                  Dr.          111,612 To Machinery - Old          238,944 To Profit on exchange            17,292 (Record the exchange of Machinery) Profit on Exchange of Machinery = 144624 - (238944 - 111612) = 17292 Answer 3. Holyfield Corporation Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          149,340 Accumulated Dep                                  Dr.            94,320 Loss on Exchange                                   Dr.            12,576 To Machinery - Old          251,520 To Cash              4,716 (Record the exchange of Machinery) Loss on Exchange of Machinery = (251520 - 94320) - 251520 + 4716= $12576. Liston Company Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          144,624 Cash                                                             Dr.              4,716 Accumulated Dep                                  Dr.          117,900 To Machinery - Old          251,520 To Profit on exchange            15,720 (Record the exchange of Machinery) Profit on Exchange of Machinery = 144624 4716 - (2515520 - 117900) = $15720 Answer 4. Holyfield Corporation Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - New                                   Dr.          290,820 Accumulated Dep                                  Dr.            94,320 Loss on Exchange                                   Dr.            12,576 To Machinery - Old          251,520 To Cash          146,196 (Record the exchange of Machinery) Loss on Exchange of Machinery = (251520 - 94320) - 290820 +146196 = $12576. Greeley Company Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Machinery - Old                                      Dr.          144,624 Cash                                                             Dr.          146,196 To Sales          290,820 (Record the Sale of Machinery) 2 Cost of Goods Sold                               Dr.          204,360    To Inventory            20,360 (record the cost of mach transferred to COGS)

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.