Exercise 10-19 Sunland Co. Coronado Co. Account Titles and Explanation Debit Cre
ID: 2580870 • Letter: E
Question
Exercise 10-19
Sunland Co.
Coronado Co.
Account Titles and Explanation
Debit
Credit
Sunland Company:
Coronado Company:
Account Titles and Explanation
Debit
Credit
Sunland Company
Coronado Company
Exercise 10-19
Sunland Company exchanged equipment used in its manufacturing operations plus $4,320 in cash for similar equipment used in the operations of Coronado Company. The following information pertains to the exchange.Sunland Co.
Coronado Co.
Equipment (cost) $40,320 $40,320 Accumulated depreciation 27,360 14,400 Fair value of equipment 18,000 22,320 Cash given up 4,320Explanation / Answer
Exchange lacks commercial substance
New asset is recorded at book value of old asset + cash paid. No gain or loss on exchange since recorded at book value.
Exchange with commercial substance
New asset is recorded at fair value of old asset + cash paid. Difference between fair value and book value of old asset is the gain on exchange.
Account Titles and Explanation Debit Credit Sunland Company's Books Accumulated Depreciation - Equipment-old 27360 Equipment-new (book value of old + cash paid) 17280 Cash 4320 Equipment-old 40320 (To record exchange of equipment) Coronado Company's Books Accumulated Depreciation - Equipment-old 14400 Equipment-new (book value of old - cash received) 21600 Cash 4320 Equipment-old 40320 (To record exchange of equipment)Related Questions
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