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Problem 10-10 (Part Level Submission) During the current year, Monty Construction trades an old crane that...

Problem 10-10 (Part Level Submission) During the current year, Monty Construction trades an old crane that has a book value of $91,800 (original cost $142,800 less accumulated depreciation $51,000) for a new crane from Flounder Manufacturing Co. The new crane cost Flounder $168,300 to manufacture and is classified as inventory. The following information is also available. Monty Const. Flounder Mfg. Co. Fair value of old crane $83,640 Fair value of new crane $204,000 Cash paid 120,360 Cash received 120,360 Collapse question part (a) Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Monty Construction and (2) Flounder Manufacturing. (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.) No. Account Titles and Explanation Debit Credit 1. Monty Construction 2. Flounder Manufacturing (To record exchange of inventory) (To record cost of inventory)

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ANSWER

Having commercial customer
Monty Construction
Dr Cr
Equipment ($83640 + $120360) 204,000
Accumulated Depreciation—Equipment 51,000
Loss on Disposal of Plant Assets (bal fig) 8,160
Equipment 142800
Cash 120360
Flounder  books
Cash $120,360
Equipment Inventory 83640
Sales $204,000
Cost of good sold $168,300
Equipment Inventory $168,300
b) Lacking commercial substance
same entries as for Mash there is loss and for crane Nash is a customer
Monty  Const
Dr Cr
Equipment ($83640 + $120360) 204,000
Accumulated Depreciation—Equipment 51,000
Loss on Disposal of Plant Assets (bal fig) 8,160
Equipment 142800
Cash 120360
Flounder  books
Cash $120,360
Equipment Inventory 83640
Sales $204,000
Cost of good sold $168,300
Equipment Inventory $168,300

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