On July 1, brick Company exchanged a machine for a similar machine owned by tars

Question

On July 1, brick Company exchanged a machine for a similar machine owned by tarsal Company and received $7,000 cash from tarsal Company. bricks machine had an original cost of $80,000, accumulatec depreciation to date of $14,500, and a fair market value of $60,000. tarsal machine had an original cost of $95,000 and a book value of $45,000 and a fair value of $53,000 Prepare journal entries by brick company to record this transaction Prepare journal entries by tarsal company to record this transaction.

Explanation / Answer

Brick Company Tarsel Company Original Cost                  80,000                    95,000 Accumulated Depreciation                (14,500)                  (50,000) Book Value                  65,500                    45,000 Fair market value                  60,000                    53,000 Brick company received 7000 more in exchange of machines Brick Company Cash   a/c                   Dr                    7,000 Machine a/c            Dr                  53,000 Accumulated dep old machine    Dr                  14,500 Loss of old machine    Dr                    5,500        To Machine old                    80,000 (Being old machine liquidated in exchange of new machine) Tarsel Company Accumulated dep old machine    Dr                  50,000 New Machine          Dr                  60,000 Loss of old machine    Dr        To Machine old                    95,000        To Cash                       7,000        To Gain on old machine                       8,000 (Being old machine liquidated in exchange of new machine)

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