Question

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

Answer 1

• [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]