Formulas Data Review View File Home nsert Page Layout 1 AutoSum Recently Financi

Question

Formulas Data Review View File Home nsert Page Layout 1 AutoSum Recently Financial Logical Text Date & Lookup & Math &More; Insert Function Time . Reference Trig- Functions Used- Function Library 1 Mathews Company exchanged equipment used in its manufacturing operations $7,000 in cash for similar equipment used in the 3 operations of Biggio Company. The following information pertains to the exchange. Mathews Co. Biggio Co $154,000 $36,000 $125,000 $7,000 $142,000 $18,000 $132,000 Equipment (cost) Accumulated depreciation 8 Fair value of equipment Cash given up 10 11 Instructions 12 (a) Prepare the journal entries to record the exchange on the books of both companie 3 Assume that the exchange lacks commercial substance 14 Mathewes 15 Book Value $18,000 Fair Value $125,000 Gain (Loss) 7.000 assest acquired Cash Acc Dep 125,000 7000 19 536,000 20 $154,000 23 24 Baiggio 25 Book Value 536,000 Fair Value mterest Capitalization, Exchange $132.000 Gan(Loss) (10.000) - i Ready Type here to search

Explanation / Answer

Ans)

Calculation of gai or loss

Mathews Co Biggio Co

Fair value of old equipment 125,000 132,000

Less: Book value of old equipment

(154,000 - 36000) (118,000) (124000)

(142,000 - 18,000)

Gain or loss on exchange 7000 8000

a) Exchange lacks Commercial substance

Mathews

Equipment (118000+ 7000) 125000

Accumulated depreciation 36000

Equipment 154,000

Cash 7000

New Equipment = Book Value of old+ Cash Paid

Defer all the Gains since no Cash Received

Biggio Co

Equipment (New) 125,000

Accumulated depreciation 18000

Cash 7000

Gain on exchange 8000

Equipment (Old) 142000

Companies recognize aloss immediatelywhether theexchange has commercial substance or not.

b) Exchange has commercial substance

Mathews Co

New Equipment = Cash Paid + Fair Value of old

Equipment (New) (7000 + 125,000) 132,000

Accumulated depreciation 36,000

Cash 7000

Equipment (Old) 154,000

Gain on exchange 7000

Biggio.Co

Equipment (New) 125,000

Accumulated depreciation 18000

Cash 7000

Gain on exchange 8000

Equipment (Old) 142,000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

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