Suppose Bonnet Company acquires some equipment from Grenoble Company in exchange for issuance of 13,000 shares...

Suppose Bonnet Company acquires some equipment from Grenoble Company in exchange for issuance of 13,000 shares of Bonnet's common stock. The equipment was carried on Grenoble's book at the $550,000 original cost less accumulated depreciation of $250,000. Bonnet's stock actively trades and has a current market value of $50 per share. Its par value is $9 per share.

Requirements 1 By using the balance sheet equation, show the effects of the transaction of the accounts of Bonnet company and Grenoble company.

2. Show the journal entries on the book of Bonnet Company and Grenoble Company.

Expert Solution

Part-2 Journal Enty-
Date	Account Title and Explanation	Debit $	Credit $
	In the Books of Bonnet Company
	Equipment (50X 13000)	$650,000.00
	Common stock (9*13000)		$117,000.00
	Par Value in Excess of Par BF)		$533,000.00

	In the Books of Grenoble Company
	Investment in Stock - Bonnet Company ( 13000X 50)	$650,000.00
	Accumulated Deprecation	$250,000.00
	Equipment		$550,000.00
	Profit on Sale of Equipment		$350,000.00

Balance Sheet Equation - Bonnet Company
	Assets	=	Liabilities	+	Stockholder's equity
	$650,000.00				$650,000.00
	Equipment				Stock Issuance


Balance Sheet Equation - Grenoble Company
	Assets	=	Liabilities	+	Stockholder's equity
Investment	$650,000.00		-$250,000.00		$350,000.00
Equipment	-$550,000.00		Accumulated Depreciation

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