Southern Company owns a building that it leases to others. The building’s fair v

Question

Southern Company owns a building that it leases to others. The building’s fair value is $2,350,000 and its book value is $1,560,000 (original cost of $2,950,000 less accumulated depreciation of $1,390,000). Southern exchanges this for a building owned by the Eastern Company. The building’s book value on Eastern’s books is $1,710,000 (original cost of $2,550,000 less accumulated depreciation of $840,000). Eastern also gives Southern $235,000 to complete the exchange. The exchange has commercial substance for both companies. Required: Prepare the journal entries to record the exchange on the books of both Southern and Eastern. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Southern: Cash 235000 Building - new 2115000 =2350000-235000 Accumulated depreciation- building 1390000         Building - old 2950000         Gain on exchange 790000 Eastern: Building - new 2350000 Accumulated depreciation- building 840000         Building - old 2550000         Gain on exchange 405000         Cash 235000

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