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:
- Assuming the above listed transaction has Commercial Substance, record the exchange for both Gillian’s Gems and Tara’s Treasures in accordance with GAAP.
- 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 agoRelated 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:
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Instructions
(a)
Assuming that the
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Group of answer choices
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$0
$2,000
$1,000
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