Question

Southern Company owns a building that it leases to others. The building's fair value is $1,950,000 and its book value is $1,240,000 (original cost of $2,550,000 less accumulated depreciation of $1,310,000). Southern exchanges this for a building owned by the Eastern Company. The building's book value on Eastern's books is $1,390,000 (original cost of $2,150,000 less accumulated depreciation of $760,000). Eastern also gives Southern $195,000 to complete the exchange. The exchange has commercial substance for both companies. Required: Prepare the journal entries to record the exchange on the books of both Southern and Eastern. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record the exchange on the books of Southern Company. The exchange has commercial substance for both companies. Note: Enter debits before credits. Event General Journal Debit Credit

Answer 1

Answer:

Accounts titles and Explanation	Debit ($)	Credit ($)
Southern:
Cash	1,95,000
Building - new(19,50,000-195,000)	17,55,000
Accumulated depreciation- building	13,10,000
Building - old		25,50,000
Gain on exchange( bal. fig)		7,10,000
(To record the entry on exchange of asset)
Eastern:
Building - new	19,50,000
Accumulated depreciation- building	7,60,000
Building - old		21,50,000
Gain on exchange(bal. fig)		3,65,000
Cash		1,95,000
(To record the entry on exchange of asset)