Question

Two independent companies, Denver and Bristol, each own a warehouse, and Denver agrees to pay Bristol $2,000 to complete the exchange. The following information for the two warehouses is available:

	Denver	Bristol
Cost	$90,000	$47,000
Accumulated depreciation	50,000	20,000
Fair value	33,000	35,000

Required:

Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange

Answer 1

	In the books of Denver
Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Warehouse [New]	$          35,000
	Accumulated Depreciation	$          50,000
	Loss on disposal of Warehouse [40000-33000]	$            7,000
	Warehouse [Used]		$      90,000
	Cash		$        2,000
	( To record warehouse exchanged)
	In the books of Bristol
Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Warehouse [New]	$          33,000
	Accumulated Depreciation	$          20,000
	Cash	$            2,000
	Gain on disposal of Warehouse [35000-27000]		$        8,000
	Warehouse [Used]		$      47,000
	( To record warehouse exchanged)