Question

Problem 145

Hodge Co. exchanged Building 24 which has an appraised value of $4,821,000, a cost of $7,584,000, and accumulated depreciation of $3,588,000 for Building M belonging to Fine Co. Building M has an appraised value of $4,531,000, a cost of $9,034,000, and accumulated depreciation of $4,714,000. The correct amount of cash was also paid. Assume depreciation has already been updated.

Prepare the entries on both companies' books assuming the exchange had no commercial substance. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 12,215.)

Hodge Co.:

Account Titles and Explanation	Debit	Credit

Fine Co.:

Account Titles and Explanation	Debit	Credit

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Answer 1

Hodge Co. :
Account Titles and Explanation	Debit	Credit
Building M	$ 3,755,627
Accumulated Depreciation -Buildings	$ 3,588,000
Cash ($4,821,000 -$ 4,531,000)	$ 290,000
Building 24		$ 7,584,000
Gain on Disposal of plant Assets		$ 49,627
(To record Amount for Building M on Hodge Co. Books )
(All explanation shown in Note 1 )
Fine Co.
Account Titles and Explanation	Debit	Credit
Building 24 (9,034,000+290,000 - 4,714,000 )	$ 4,610,000
Accumulated Depreciation -Buildings	$4,714,000
Building M		$ 9,034,000
Cash ($4,821,000 -$ 4,531,000)		$ 290,000
(To record Amount for Building 24 on Fine Co. Books )
(All explanation shown in Note 2 )
Explanation :
Note 1 :
Hodge Co. :
Particulars	Amount($)
Cost of Building 24	$ 7,584,000
Less: Accumulated Depreciation	($3,588,000)
Book Value of Building 24	$ 3,996,000
Less: Fair value of Building 24	($4,821,000)
Gain on Building 24	$ 825,000
Actual Gain Recognized = (($4,821,000 -$ 4,531,000)/$ 4,821,000 )*$ 825,000
Actual Gain Recognized = $ 49,627 (Rounded)
Particulars	Amount($)
Fair value of Building M	$ 4,531,000
Less: Deferred Gain ($825,000 -$49,627 )	($775,373)
Basis For Building M	$ 3,755,627
Note 2 :
Fine Co.
Particulars	Amount($)
Cost of Building M	$ 9,034,000
Less: Accumulated Depreciation	($4,714,000)
Book Value of Building M	$ 4,320,000
Less: Fair value of Building M	($4,531,000)
Gain on Building M	$ 211,000