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
$
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)
b.
$
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$
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c.
$
107,800
$
19,400
d.
$
107,800
$
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)
Multiple Choice
Option D
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(1)
At what amount will Calaveras value the pickup
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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
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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:
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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
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Required:
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2. Prepare the journal...
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Required:
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2. Prepare the journal...
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