On September 12, Cheyenne Company agreed to an exchange of assets with another c

Question

On September 12, Cheyenne Company agreed to an exchange of assets with another company. Cheyenne gave up a machine with an original cost of $50,100. $30,500 in accumulated depreciation had been recorded on this machine over the course of Cheyenne’s ownership. Cheyenne determined that the machine being given up had a fair value of $18,500. Cheyenne also paid $7,600 in cash. Assume that Cheyenne follows IFRS and that the transaction has commercial substance. Prepare the journal entry to record the asset exchange on Cheyenne’s books.

Explanation / Answer

loss on exchange : book value - accumulated depreciation = 50100 - 30500

= $ 19600

fair value = ($ 18500)

loss on exchange = $ 1100

machine (fair value of asset given + cash paid = 18500+7600) 26100 accumulated depreciation 30500 loss on exchange of assets 1100 machine 50100 cash 7600 ( to record exchange of machine having commercial substance)

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