Question

On August 1, Flounder, Inc. exchanged productive assets with Culver, Inc. Flounder’s asset is referred to below as “Asset A,” and Culver’ is referred to as “Asset B.” The following facts pertain to these assets.

		Asset A		Asset B
Original cost		$132,480		$151,800
Accumulated depreciation (to date of exchange)		55,200		64,860
Fair value at date of exchange		82,800		103,500
Cash paid by Flounder, Inc.		20,700
Cash received by Culver, Inc.				20,700

Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Flounder, Inc. and Culver, Inc. in accordance with generally accepted accounting principles. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. 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
Flounder, Inc.’s Books
Culver, Inc.’s Books

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Answer 1

	Account Titles and Explanation	Debit	Credit
	Flounder, Inc.’s Books
	Asset B	97,980		Balance
	Accumulated depreciation	55,200
	Asset A		132,480
	Cash		20,700
	Culver, Inc.’s Books
	Asset A	69,552		Balance
	Accumulated depreciation	64,860
	Cash	20,700
	Asset B		151,800
	Gain on Exchange		3,312
Working
Culver, Inc.’s Books
	Cost	151,800
	Less: Accumulated depreciation	64,860
	Book Value	86,940
	Fair Value	103,500
	Gain on Exchange	16,560
	Fair Value Divided by cash received	5
	Gain on Exchange to be recognized (16,560/5)	3,312