Blue Company exchanged equipment used in its manufacturing operations plus $3,06
ID: 2551618 • Letter: B
Question
Blue Company exchanged equipment used in its manufacturing operations plus $3,060 in cash for similar equipment used in the operations of Kingbird Company. The following information pertains to the exchange. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up Blue Co. $28,560 19,380 12,750 3,060 Kingbird Co. $28,560 10,200 15,810 Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (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.) Debit Credit Account Titles and Explanation Blue Company:Explanation / Answer
Not to have commercial substance
Blue company
Debit
Credit
Equipment (cost-Acc dep)+ cash
(28560-19380+3060)
$12,240
Accumulated depreciation
$19,380
Equipment cost
$28,560
cash
$3,060
Defer all the Gains since no Cash Received
Kingbird company
Equipment new
$15,810
Accumulated depreciation
$10,200
cash
$3,060
Equipment cost old
$28,560
Gain on exchange (Bal fig)
$510
Not to have commercial substance
Blue company
Debit
Credit
Equipment (cost-Acc dep)+ cash
(28560-19380+3060)
$12,240
Accumulated depreciation
$19,380
Equipment cost
$28,560
cash
$3,060
Defer all the Gains since no Cash Received
Kingbird company
Equipment new
$15,810
Accumulated depreciation
$10,200
cash
$3,060
Equipment cost old
$28,560
Gain on exchange (Bal fig)
$510
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