dditional Problem 8 Sheffield Corporation exchanged equipment used in its manufa
ID: 2520616 • Letter: D
Question
dditional Problem 8
Sheffield Corporation exchanged equipment used in its manufacturing operations for equipment used in the operations of Tamarisk Ltd. The following information pertains to the exchange:
Both companies agreed that the exchange had commercial substance for both companies.
Prepare the necessary journal entries to record the asset exchange on the books of both companies. (Credit account titles are automatically indented when the 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.)
Sheffield Corporation:
Account Titles and Explanation
Debit
Credit
Tamarisk Ltd.:
Account Titles and Explanation
Debit
Credit
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Solution: Sheffield Corporation: Account Titles and Explanation Debit Credit Equipment (New) 46,600 Accumulated Depreciation - Equipment 66,900 Cash 1,900 Equipment (Old) 84,900 Gain on Disposal of Equipment 26,700 Working Notes: Account Titles and Explanation Debit Credit Equipment (New) 46,600 [Fair value of Equipment received = 46,600] Accumulated Depreciation - Equipment 66,900 [Accumulated Dep. Of old Equipment] Cash 1,900 [cash given] Equipment (Old) 84,900 [cost of old Equipment] Gain on Disposal of Equipment 26,700 [Fair value of Equipment received - (cash given + Book value of old Equipment ) ] [46,600 - (1,900 + (84,900- 66,900))] [46,600 - 19,900 = 26,700] Tamarisk Ltd Account Titles and Explanation Debit Credit Cash 1,900 Equipment (New) 42,000 Accumulated Depreciation - Equipment 30,900 Loss on Disposal of Equipment 10,100 Equipment (Old) 84,900 Working Notes: Account Titles and Explanation Debit Credit Cash 1,900 [amount received ] Equipment (New) 42,000 [fair value of equipment received ] Accumulated Depreciation - Equipment 30,900 [old Equipment accumulated Depr. ] Loss on Disposal of Equipment 10,100 [cash received + Fair value of Equipment received - Book value of old Equipment ] [1,900 + 42,000 - (84,900-30,900) = 43900-54,000 = - 10,100] Equipment (Old) 84,900 Please feel free to ask if anything about above solution in comment section of the question.
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