On September 3, 2018, the Robers Company exchanged equipment with Phifer Corpora
ID: 2577953 • Letter: O
Question
On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows: Robers’ Asset Phifer’s Asset Original cost $ 145,000 $ 165,000 Accumulated depreciation 75,000 83,000 Fair value 82,500 72,500 To equalize the exchange, Phifer paid Robers $10,000 in cash. Required: Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
Calculation oof net asset values (Asset cost- Accumulated depreciation):
Robers Asset:
Net asset value ($145,000-$75,000) = $70,000
Phifer's Asset:
Net asset value ($165,000-$83,000) = $82,000
Journal Entries in Robers's Books
Equipment (Phifers Asset Fair value) Dr $72,500
Cash Dr $10,000
To Equipment (Robers Net asset) Cr $70,000
To Profit on exchange of Equipment (Balancing fig) $12,500
(Being exchange of Equipments entry recorded)
Journal Entries in Phifer's Books
Equipment (Robers Asset fair value) Dr $82,500
Loss on exchange of Equipment (Balancing fig) $9,500
To Cash Cr $10,000
To Equipment (Phifer's Net asset) Cr $82,000
(Being exchange of Equipments entry recorded)
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