Question

Exercise 10-19 Oriole Company exchanged equipment used in its manufacturing operations plus $3,480 in cash for similar equipment used in the operations of Waterway Company. The following information pertains to the exchange. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up Oriole Co. $32,480 22,040 14,500 3,480 Waterway Co. $32,480 11,600 17,980 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 Oriole Company: Waterway Company:

Answer 1

Exchange lacks Commercial Substance:
Oriole Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 13,920
Accumulated Depreciation - Equipment	$ 22,040
Equipment		$ 32,480
Cash		$    3,480
Waterway Company:
Equipment (new)	$ 14,500
Accumulated Depreciation - Equipment	$ 11,600
Cash	$    3,480
Loss on disposal of equipment	$    2,900
Equipment		$ 32,480
Exchange has Commercial Substance:
Oriole Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 17,980
Accumulated Depreciation - Equipment	$ 22,040
Equipment		$ 32,480
Cash		$    3,480
Gain on disposal of equipment		$    4,060
Waterway Company:
Equipment (new)	$ 14,500
Accumulated Depreciation - Equipment	$ 11,600
Cash	$    3,480
Loss on disposal of equipment	$    2,900
Equipment		$ 32,480