China Inn and Midwest Chicken exchanged assets. Midwest Chicken received equipme

Question

China Inn and Midwest Chicken exchanged assets. Midwest Chicken received equipment and gave a delivery truck. The fair value and book value of the delivery truck given were $30,100 and $32,400 (original cost of $37,400 less accumulated depreciation of $5,000), respectively. To equalize market values of the exchanged assets, Midwest Chicken received $7,600 in cash from China Inn. 1. At what amount did Midwest Chicken record the equipment? Equipment 2. How much gain or loss did Midwest Chicken recognize on the exchange?

Explanation / Answer

1. Equipment = $22,500

2. Loss on exchange = $2,300

General Journal Debit Credit Equipment $22,500 Accumulated depreciation $5,000 Loss on exchange $2,300 Cash $7,600 Equipment (Delivery truck) $37,400

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