Question

Exercise 10-19 Sheffield Company exchanged equipment used in its manufacturing operations plus $3,600 in cash for similar equipment used in the operations of Tamarisk Company. The following information pertains to the exchange. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up Sheffield Co. $33,600 22,800 15,000 3,600 Tamarisk Co. $33,600 12,000 18,600 Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (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 o for the amounts.) Debit Credit Account Titles and Explanation Sheffield Company: Tamarisk Company:

Answer 1

Exchange lacks Commercial Substance:
Sheffield Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 14,400
Accumulated Depreciation - Equipment	$ 22,800
Equipment		$ 33,600
Cash		$    3,600
Tamarisk Company:
Equipment (new)	$ 15,000
Accumulated Depreciation - Equipment	$ 12,000
Cash	$    3,600
Loss on disposal of equipment	$    3,000
Equipment		$ 33,600
Exchange has Commercial Substance:
Sheffield Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 18,600
Accumulated Depreciation - Equipment	$ 22,800
Equipment		$ 33,600
Cash		$    3,600
Gain on disposal of equipment		$    4,200
Tamarisk Company:
Equipment (new)	$ 15,000
Accumulated Depreciation - Equipment	$ 12,000
Cash	$    3,600
Loss on disposal of equipment	$    3,000
Equipment		$ 33,600