Question

In: Accounting

On August 1, 2020 Gillian’s Gems exchanged productive Assets with Tara’s Treasures with the following data...

On August 1, 2020 Gillian’s Gems exchanged productive Assets with Tara’s Treasures with the following data related to the Assets:

Gillian’s                           Tara’s

Equipment cost                                        $96,000                           $110,000

Accumulated Depreciation                 $40,000                          $47,000

Fair Value, Date Exchange                  $60,000                           $75,000

Cash Paid by Gillian                               $15,000

Cash Received by Tara                                                                     $15,000

Required:

  1. Assuming the above listed transaction has Commercial Substance, record the exchange for both Gillian’s Gems and Tara’s Treasures in accordance with GAAP.
  2. Record the same entry, assuming the transaction lacks Commercial Substance.

Solutions

Expert Solution

  • Requirement [a]

HAS Commercial Substance

Accounts title

Debit

Credit

Working

Gillian's

Equipment (new)

$75,000

[Fair Value of old Equipment + Cash paid]

Accumulated Depreciation

$40,000

[Of Old Equipment]

   Gain on Exchange

$4,000

[Balancing amount]

   Equipment (Old)

$96,000

[Cost of old Equipment]

   Cash

$15,000

[Cash paid]

Tara's

Equipment (new)

$60,000

[Fair value of Equipment received]

Accumulated Depreciation

$47,000

[Of Old Equipment]

Cash

$15,000

[Cash received]

   Gain on exchange

$12,000

[Balancing amount]

   Equipment (Old)

$110,000

[Cost of old Equipment]

  • Requirement [b]

LACKS Commercial Substance

Accounts title

Debit

Credit

Working

Gillian's

Equipment (new)

$71,000

[Balancing amount]

Accumulated Depreciation

$40,000

[Of Old Equipment]

   Equipment (Old)

$96,000

[Cost of old Equipment]

   Cash

$15,000

[Cash paid]

Tara's

Equipment (new)

$60,000

[Fair value of Equipment received]

Accumulated Depreciation

$47,000

[Of Old Equipment]

Cash

$15,000

[Cash received]

   Gain on exchange

$12,000

[Balancing amount]

   Equipment (Old)

$110,000

[Cost of old Equipment]

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

On August 1, 2020 Gillian’s Gems exchanged productive Assets with Tara’s Treasures with the following data...
On August 1, 2020 Gillian’s Gems exchanged productive Assets with Tara’s Treasures with the following data related to the Assets: Gillian’s                       Tara’s Equipment cost $96,000 $110,000 ==> ($96000 Gillian's , $110000 Tara's) Accumulated Depreciation $40,000 $47,000 ==> ($40000 Gillian's, $47000 Tara's) Fair Value, Date Exchange $60,000    $75,000 ==> ($60,000 Gillian's , $75,000 Tara's) Cash Paid by Gillian $15,000 ==> ( $15,000 Gillian's) Cash Received by Tara $15,000 ( $15,000 Tara's) Required: Assuming the above listed transaction has Commercial Substance, record the...
On August 1, Splish, Inc. exchanged productive assets with Blossom, Inc. Splish’s asset is referred to...
On August 1, Splish, Inc. exchanged productive assets with Blossom, Inc. Splish’s asset is referred to below as “Asset A,” and Blossom’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $ 142,080 $ 162,800 Accumulated depreciation (to date of exchange) 59,200 69,560 Fair value at date of exchange 88,800 111,000 Cash paid by Splish, Inc. 22,200 Cash received by Blossom, Inc. 22,200 Assuming that the exchange of Assets A...
On August 1, Teal, Inc. exchanged productive assets with Flint, Inc. Teal’s asset is referred to...
On August 1, Teal, Inc. exchanged productive assets with Flint, Inc. Teal’s asset is referred to below as “Asset A,” and Flint’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $105,600 $121,000 Accumulated depreciation (to date of exchange) 44,000 51,700 Fair value at date of exchange 66,000 82,500 Cash paid by Teal, Inc. 16,500 Cash received by Flint, Inc. 16,500 Assuming that the exchange of Assets A and B...
On August 1, Sarasota, Inc. exchanged productive assets with Ivanhoe, Inc. Sarasota’s asset is referred to...
On August 1, Sarasota, Inc. exchanged productive assets with Ivanhoe, Inc. Sarasota’s asset is referred to below as “Asset A,” and Ivanhoe’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $117,120 $134,200 Accumulated depreciation (to date of exchange) 48,800 57,340 Fair value at date of exchange 73,200 91,500 Cash paid by Sarasota, Inc. 18,300 Cash received by Ivanhoe, Inc. 18,300 (a) Assuming that the exchange of Assets A and...
On August 1, Flounder, Inc. exchanged productive assets with Culver, Inc. Flounder’s asset is referred to...
On August 1, Flounder, Inc. exchanged productive assets with Culver, Inc. Flounder’s asset is referred to below as “Asset A,” and Culver’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost       $132,480       $151,800 Accumulated depreciation (to date of exchange)       55,200       64,860 Fair value at date of exchange       82,800       103,500 Cash paid by Flounder, Inc.       20,700       Cash received by Culver, Inc.          ...
On August 1, Ivanhoe, Inc. exchanged productive assets with Shamrock, Inc. Ivanhoe’s asset is referred to...
On August 1, Ivanhoe, Inc. exchanged productive assets with Shamrock, Inc. Ivanhoe’s asset is referred to below as “Asset A,” and Shamrock’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $111,360 $127,600 Accumulated depreciation (to date of exchange) 46,400 54,520 Fair value at date of exchange 69,600 87,000 Cash paid by Ivanhoe, Inc. 17,400 Cash received by Shamrock, Inc. 17,400 Assuming that the exchange of Assets A and B...
On August 1, Flounder, Inc. exchanged productive assets with Culver, Inc. Flounder’s asset is referred to...
On August 1, Flounder, Inc. exchanged productive assets with Culver, Inc. Flounder’s asset is referred to below as “Asset A,” and Culver’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $132,480 $151,800 Accumulated depreciation (to date of exchange) 55,200 64,860 Fair value at date of exchange 82,800 103,500 Cash paid by Flounder, Inc. 20,700 Cash received by Culver, Inc. 20,700 Assuming that the exchange of Assets A and B...
On August 1, Hyde, Inc. exchanged productive assets with Wiggins, Inc. Hyde's asset is referred to...
On August 1, Hyde, Inc. exchanged productive assets with Wiggins, Inc. Hyde's asset is referred to below as “Asset A,” and Wiggins' is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $96,000 $110,000 Accumulated depreciation (to date of exchange) 40,000 47,000 Fair value at date of exchange 60,000 75,000 Cash paid by Hyde, Inc. 15,000 Cash received by Wiggins, Inc. 15,000 Instructions (a)   Assuming that the exchange of Assets A...
Problem 10-9 On August 1, Hyde, Inc. exchanged productive assets with Wiggins, Inc. Hyde’s asset is...
Problem 10-9 On August 1, Hyde, Inc. exchanged productive assets with Wiggins, Inc. Hyde’s asset is referred to below as “Asset A,” and Wiggins’ is referred to as “Asset B.” The following facts pertain to these assets. Asset A Asset B Original cost $96,000 $110,000 Accumulated depreciation (to date of exchange) 40,000 47,000 Fair value at date of exchange 60,000 75,000 Cash paid by Hyde, Inc. 15,000 Cash received by Wiggins, Inc. 15,000 Assuming that the exchange of Assets A...
Bogut Co. and Nadal exchanged productive assets. The asset surrendered by Bogut had a carrying amount...
Bogut Co. and Nadal exchanged productive assets. The asset surrendered by Bogut had a carrying amount and a list price of $10,000 and $15,000, respectively. The asset received by Bogut had a fair value of $13,000. If Bogut paid Nadal $2,000 in cash, Bogut should recognize a gain (loss) of Group of answer choices $(4,000) $0 $2,000 $1,000
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT