Question

In: Accounting

Exercise 10-19 Bonita Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for...

Exercise 10-19 Bonita Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment used in the operations of Windsor Company. The following information pertains to the exchange. Bonita Co. Windsor Co. Equipment (cost) $34,720 $34,720 Accumulated depreciation 23,560 12,400 Fair value of equipment 15,500 19,220 Cash given up 3,720 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 Bonita Company: Windsor Company: SHOW 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 Bonita Company Windsor Company

Solutions

Expert Solution

Solution:

As transaction is having lack of commercial substance therefore no gain/loss will be recorded on exchange of old Equipment

Therefore Bonita record the new equipment for financial accounting purpose at = Cash paid + Book value of old Equipment

= $3,720 + ($34,720 - $23,560) = $14,880

Windsor company will record the new equipment for financial report purpose at = Book value of old equipment - Cash received

= ($34,720 - $12,400) - $3,720 = $18,600

Journal Entries - Bonita Company
Particulars Debit Credit
Equipment Dr $14,880.00
Accumualated depreciation Dr $23,560.00
        To Cash $3,720.00
        To Equipment $34,720.00
(To record exchange of equipment)
Journal Entries - Windsor Company
Particulars Debit Credit
Equipment Dr $18,600.00
Accumualated depreciation Dr $12,400.00
Cash Dr $3,720.00
        To Equipment $34,720.00
(To record exchange of equipment)

Related Solutions

Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment...
Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment used in the operations of Delaware Company. The following information pertains to the exchange. Santana Co. | Delaware Co. Equipment (cost) $28,000 | $18,000 Accumulated depreciation 9,000 | 10,000 Fair value of equipment 14,000 | 16,000 Cash given up 2,000 Please indicate whether an account is an asset (A), liability (L), or equity (E) for journal entries, adjusting entries, and closing entries. Prepare the...
Sun Company exchanged equipment used in its manufacturing operations plus $3,240 in cash for similar equipment...
Sun Company exchanged equipment used in its manufacturing operations plus $3,240 in cash for similar equipment used in the operations of Teal Company. The following information pertains to the exchange. Sun Co. Teal Co. Equipment (cost) $30,240 $30,240 Accumulated depreciation 20,520 10,800 Fair value of equipment 13,500 16,740 Cash given up 3,240 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...
Sarasota Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment...
Sarasota Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment used in the operations of Ivanhoe Company. The following information pertains to the exchange. Sarasota Co. Ivanhoe Co. Equipment (cost) $34,720 $34,720 Accumulated depreciation 23,560 12,400 Fair value of equipment 15,500 19,220 Cash given up 3,720 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...
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...
Whispering Company exchanged equipment used in its manufacturing operations plus $4,260 in cash for similar equipment...
Whispering Company exchanged equipment used in its manufacturing operations plus $4,260 in cash for similar equipment used in the operations of Metlock Company. The following information pertains to the exchange. Whispering Co. Metlock Co. Equipment (cost) $39,760 $39,760 Accumulated depreciation 26,980 14,200 Fair value of equipment 17,750 22,010 Cash given up 4,260 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...
Q. Ramirez Company exchanged equipment used in its manufacturing operations plus $6,000 in cash for similar...
Q. Ramirez Company exchanged equipment used in its manufacturing operations plus $6,000 in cash for similar equipment used in the operations of Kennedy Company. The following information pertains to the exchange.                                                                            Ramirez Co       Kennedy Co                         Equipment (cost)                          84,000               $84,000                          Accumulated depreciation           57,000                 30,000                         Fair value of equipment               40,500                 46,500                         Cash given up                                 6,000 Instructions Prepare the journal entries to record the exchange on the books of both companies. Assume that exchange...
Q2 Mathews Company exchanged equipment used in its manufacturing operations plus $9,800 in cash for similar...
Q2 Mathews Company exchanged equipment used in its manufacturing operations plus $9,800 in cash for similar equipment used in the operations of Biggio Company. The following information pertains to the exchange. Mathews Co. Biggio Co. Equipment (cost) $153,000 $146,000 Accumulated depreciation $32,000 $19,000 Fair value of equipment $122,200 $132,000 Cash given up $9,800 Instructions (a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. Mathewes Book Value Fair...
Shamrock Ltd. exchanged equipment used in its manufacturing operations for equipment used in the operations of...
Shamrock Ltd. exchanged equipment used in its manufacturing operations for equipment used in the operations of Annon Ltd. The following information pertains to the exchange: Shamrock Ltd. Annon Ltd. Equipment (cost) $84,100 $84,100 Accumulated depreciation 46,600 40,200 Fair value of old equipment 42,100 42,900 Cash given up 800 Both companies agreed that the exchange had commercial substance for both companies. Prepare the necessary journal entries to record the asset exchange on the books of both companies. (Credit account titles are...
ABC Company exchanged equipment used in its manufacturing operations for a similar piece of equipment used in the operations of XYZ Corporation.
  ABC Company exchanged equipment used in its manufacturing operations for a similar piece of equipment used in the operations of XYZ Corporation.  The following information pertains to the exchange.  The exchange lacks commercial substance.   ABC Company XYZ Company Equipment (costs)      $28,000       $34,000 Accumulated Depreciation        12,000         10,000 Fair Value of Equipment           28,500 Cash given up          7,000   Determine the Original Cost of the New Asset that ABC should report on their balance sheet as a result of this exchange as...
On January 2, 2018, the Jackson Company purchased equipment to be used in its manufacturing process....
On January 2, 2018, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $43,625. The expenditures made to acquire the asset were as follows: Purchase price $ 198,000 Freight charges 5,200 Installation charges 8,000 Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT