UNM purchased a parcel of land at S85000 three years ago. In 2016, UNM exchanged
ID: 2562534 • Letter: U
Question
UNM purchased a parcel of land at S85000 three years ago. In 2016, UNM exchanged the land for a machine owned by CNM. CNM originally paid $200,000 for the machine, and accumulated depreciation was $119,000 at the time of the exchange. UNM also received S10,000 from CNM. The market value of the land was S90,000 at the time of the exchange. a) What is the amount of gain or loss UNM should report from this exchange? b) What is the amount of gain or loss UNM should report from this exchange? o) Prepare journal entries for UNM and CNM.Explanation / Answer
a) Amount of gain on land exhanged = fair value of land - book value of land
=$90000 - $85000
= $5000
b) Amount of loss on exchange with machine = fair value of machine - Book value of machine
=[fair value of land - cash received] - [cost - accumulated depreciation]
= [90000 - 10000] - [200000 - 119000]
= 80000 -81000
=$1000
c) In books of UNM
Date Accounts title Dr. Cr. 2016 Machine $80000 Cash $10000 To gain from exchange $5000 To Land $85000 In books of CNM 2016 Land 90000 Accumulated Depreciation 119000 Loss from exchange 1000 To Machine 200000 To cash 10000
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