Ivanhoe Co. Shamrock Co. Account Titles and Explanation Debit Credit Ivanhoe Com

Question

Ivanhoe Co.

Shamrock Co.

Account Titles and Explanation

Debit

Credit

Ivanhoe Company:

Shamrock Company:

Account Titles and Explanation

Debit

Credit

Ivanhoe Company

Shamrock Company

Ivanhoe Company exchanged equipment used in its manufacturing operations plus $3,420 in cash for similar equipment used in the operations of Shamrock Company. The following information pertains to the exchange.

Ivanhoe Co.

Shamrock Co.

Equipment (cost) $31,920 $31,920 Accumulated depreciation 21,660 11,400 Fair value of equipment 14,250 17,670 Cash given up 3,420

Explanation / Answer

Working Note : Calculation of gain or (loss) from exchange

Answer a : Exchange lacks commercial substance?

Answer b : Exchange has commercial substance?

Ivanhoe Company ($) Shamrock Company ($) Fair value of equipment.. 14,250 17,670 Book value of equipment ( Cost - Accumulated Depreciation) 10,260 20,520 Gain or (loss) from exchange $3,990 ($2,850)

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