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On March 1, year 1, Marvin Corporation promises to unconditionally transfer a building that cost $125,000...

On March 1, year 1, Marvin Corporation promises to unconditionally transfer a building that cost $125,000 with an appraised value of $175,000 to Valerie Corporation on March 1, year 2 for a vehicle that was recently purchased for $140,000. As of December 31, year 2, Marvin Corporation has not transferred title to the building. Marvin Corporation received the vehicle. How should Marvin Corporation and Valerie

Corporation record these transactions?

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Answer #1

ANSWER

The main point to remember in this question is that the Marvin corporation didn't transfer the building.

Books of Marvin corporation

Journal entries:

Date General Journal Debit Credit
03/01/year 2

Asset- vehicle a/c

Loss on exchange

To Accounts payable-Valerie corporation a/c

(Being vehicle received from Valerie corporation)

$140,000

$35,000

$175,000

**Assumption : the accumulated depreciation is Nil.

Books of Valerie corporation

Journal entries:

Date General Journal Debit Credit
03/01/year 2

Accounts receivable-Marvin corporation a/c

To Vehicle a/c

(Being vehicle sold to Marvin corporation)

$140,000

$140,000

_____________________________________________

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