Question
In: Accounting
The Bronco Corporation exchanged land for equipment. The land had a book value of $126,000 and...
The Bronco Corporation exchanged land for equipment. The land
had a book value of $126,000 and a fair value of $162,000. Bronco
received $16,000 from the owner of the equipment to
complete the exchange which has commercial substance.
Required:
1. What is the fair value of the equipment?
2. Prepare the journal entry to record the
exchange.
Solutions
Expert Solution
1. Calculation of the fair value of the equipment
Fair value of the land = Fair value of the equipment + Cash paid
Fair value of the equipment = Fair value of the land - Cash paid = $162,000 - $16,000 = $146,000
.
| Fair value of the equipment = $146,000 |
.
2. The journal entry to record the exchange.
When an exchange has a commercial substance, the asset acquired (equipment) should be reported at –
The fair value of the asset gave up (land) plus cash paid (or minus cash received) = $146,000
(Or)
The fair value of the asset acquired.
Whichever is more clearly determinable / evident.
.
| General Journal | Debit | Credit |
| Equipment [$162,000 - $16,000] | $146,000 | |
| Cash | $16,000 | |
| Land | $126,000 | |
| Gain on exchange [$146,000 + $16,000 - $126,000] | $36,000 |
ekkarill92 answered 1 year agoRelated Solutions
P. Chang & Co. exchanged land and $9,400 cash for equipment. The book value and the...
P. Chang & Co. exchanged land and $9,400 cash for equipment.
The book value and the fair value of the land were $107,800 and
$88,400, respectively.
Assuming that the exchange has commercial substance, Chang
would record equipment and a gain/(loss) on exchange of assets in
the amounts of:
Equipment
Gain/(loss)
a.
$
97,800
$
(19,400
)
b.
$
88,400
$
(28,800
)
c.
$
107,800
$
19,400
d.
$
107,800
$
(9,400
)
Multiple Choice
Option D
Option A
Option...
Arizona Pharmacueticals exchanged laser equipment with a book value of $70,000 and a fair value of...
Arizona Pharmacueticals exchanged laser equipment with a
book value of $70,000 and a fair value of $75,000 for the newer
model of laser equipment. In addition to the old equipment, $90,000
cash was given. Please display the proper journal
entries from Arizona pharmaceuticals' point of view.
Alamos Co, exchanged equipment and $18,000 cash for similar equipment. The book value and the fair...
Alamos Co, exchanged equipment and $18,000 cash for similar
equipment. The book value and the fair value of the old equipment
were $82,000 and $90,000 respectively. Assuming that the exchange
has commercial substance, Alamos would record a gain (loss) of:
Prepare the journal entry for the above transaction.
A. Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of...
A.
Calaveras
Tire exchanged equipment for two pickup trucks. The book value and
fair value of the equipment given up were $20,000 (original cost of
$65,000 less accumulated depreciation of $45,000) and $17,000,
respectively. Assume Calaveras paid $8,000 in cash and the exchange
has commercial substance.
(1)
At what amount will Calaveras value the pickup
trucks?
(2)
How much gain or loss will the company recognize on the
exchange?
B.
A company constructs a building for its own use. Construction...
1.Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the...
1.Calaveras Tire exchanged equipment for two pickup trucks. The
book value and fair value of the equipment given up were $36,000
(original cost of $89,000 less accumulated depreciation of $53,000)
and $48,000, respectively. Assume Calaveras paid $7,000 in cash and
the exchange lacks commercial substance.
At what amount will Calaveras value the pickup trucks? How much
gain or loss will the company recognize on the exchange?
Value of Pick Up Trucks=
Gain/Loss=
2.Calaveras Tire exchanged equipment for two pickup trucks....
Stanton exchanged its old equipment for a new equipment: Book Value Fair Value Cash Paid Case I &nbs
Stanton exchanged its old equipment for a new
equipment:
Book
Value Fair
Value Cash Paid
Case
I $300,000 $340,000 $60,000
Case II
$200,000 $180,000 $28,000
Stanton records the following items in Case I (with and without
C.S.)?
Record
the new equipment
at: Record
a gain of (loss) of:
Stanton records the following items in Case II (with and without
C.S.)?
Record
the new equipment
at: Record
a gain of (loss) of:
The Tinsley Company exchanged land that it had been holding for future plant expansion for a...
The Tinsley Company exchanged land that it had been holding for
future plant expansion for a more suitable parcel located farther
from residential areas. Tinsley carried the land at its original
cost of $35,000. According to an independent appraisal, the land
currently is worth $84,000. Tinsley paid $17,000 in cash to
complete the transaction.
Required:
1. What is the fair value of the new parcel of
land received by Tinsley assuming the exchange has commercial
substance?
2. Prepare the journal...
The Tinsley Company exchanged land that it had been holding for future plant expansion for a...
The Tinsley Company exchanged land that it had been holding for
future plant expansion for a more suitable parcel located farther
from residential areas. Tinsley carried the land at its original
cost of $50,000. According to an independent appraisal, the land
currently is worth $120,000. Tinsley paid $16,000 in cash to
complete the transaction.
Required:
1. What is the fair value of the new parcel of
land received by Tinsley assuming the exchange has commercial
substance?
2. Prepare the journal...
The Tinsley Company exchanged land that it had been holding for future plant expansion for a...
The Tinsley Company exchanged land that it had been holding for
future plant expansion for a more suitable parcel located farther
from residential areas. Tinsley carried the land at its original
cost of $35,000. According to an independent appraisal, the land
currently is worth $84,000. Tinsley paid $17,000 in cash to
complete the transaction. Required: 1. What is the fair value of
the new parcel of land received by Tinsley assuming the exchange
has commercial substance? 2. Prepare the journal...
The Tinsley Company exchanged land that it had been holding for future plant expansion for a...
The Tinsley Company exchanged land that it had been holding for
future plant expansion for a more suitable parcel located farther
from residential areas. Tinsley carried the land at its original
cost of $106,250. According to an independent appraisal, the land
currently is worth $255,000. Tinsley paid $34,000 in cash to
complete the transaction.
Required:
1. What is the fair value of the new parcel of
land received by Tinsley assuming the exchange has commercial
substance?
2. Prepare the journal...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Samsung Industry that requires you to act as a change agent to form an organizational change...
- Use fork() Create a program that reads characters from an input file. Use fork to create...
- A pension fund manager is considering three mutual funds. The first is a stock fund, the...
- Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not...
- During his project presentation, Bob falls sick and performs poorly. However, his colleague, Dan, concludes that...
- A sample human input file that contains test values that a human would enter on the...
- A solution is prepared by dissolving 15 ml of methanol in 150.0 ml water at 25...
ADVERTISEMENT