Question

In: Accounting

Kingbird Company exchanged equipment used in its manufacturing operations plus $3,360 in cash for similar equipment...

Kingbird Company exchanged equipment used in its manufacturing operations plus $3,360 in cash for similar equipment used in the operations of Oriole Company. The following information pertains to the exchange.

Kingbird Co.

Oriole Co.

Equipment (cost)

$31,360 $31,360

Accumulated depreciation

21,280 11,200

Fair value of equipment

14,000 17,360

Cash given up

3,360

Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Kingbird Company:

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

Oriole Company:

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

List of Accounts

  

  

Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Kingbird Company

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

Oriole Company

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

Solutions

Expert Solution

  • [1]

LACKS Commercial Substance

Accounts title

Debit

Credit

Working

Kingbird Co

Equipment (new)

$13,440

[Balancing amount]

Accumulated Depreciation

$21,280

[Of Old Equipment]

   Equipment (Old)

$31,360

[Cost of old Equipment]

   Cash

$3,360

[Cash paid]

Oriole Co

Equipment (new)

$14,000

[Fair value of Equipment received]

Accumulated Depreciation

$11,200

[Of Old Equipment]

Cash

$3,360

[Cash received]

Loss on Exchange

$2,800

[Balancing amount]

   Equipment (Old)

$31,360

[Cost of old Equipment]

  • [2]

HAS Commercial Substance

Accounts title

Debit

Credit

Working

Kingbird Co

Equipment (new)

$17,360

[Fair Value of old Equipment + Cash paid]

Accumulated Depreciation

$21,280

[Of Old Equipment]

Loss on exchange

$4,000

[Balancing amount]

   Equipment (Old)

$31,360

[Cost of old Equipment]

   Cash

$3,360

[Cash paid]

Oriole Co

Equipment (new)

$14,000

[Fair value of Equipment received]

Accumulated Depreciation

$11,200

[Of Old Equipment]

Cash

$3,360

[Cash received]

Loss on Exchange

$2,800

[Balancing amount]

   Equipment (Old)

$31,360

[Cost of old Equipment]


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