Question

Kimberly Co. exchanged Building 24 which has an appraised value of $4,800,000, a cost of $7,630,000, and accumulated depreciation of $3,610,000 for Building M belonging to Oriole Co. Building M has an appraised value of $4,560,000, a cost of $9,095,000, and accumulated depreciation of $4,757,000. The correct amount of cash was also paid. Assume depreciation has already been updated. Prepare the entries on both companies' books assuming the exchange had no commercial substance. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 12,215.) Kimberly Co.: Account Titles and Explanation Debit Credit Oriole Co.: Account Titles and Explanation Debit Credit

Answer 1

Kimberly Company:
Accounts	Debit	Credit
Building M	$ 38,19,000
Accumulated Depreciation	$ 36,10,000
Cash	$   2,40,000
Building 24		$ 76,30,000
Gain on exchange		$       39,000
Oriole Company:
Accounts	Debit	Credit
Accumulated Depreciation	$ 47,57,000
Building 24	$ 45,78,000
Building M		$ 90,95,000
Cash		$   2,40,000
Workings:
Cash	=	$4800000 - $4560000
		$   2,40,000
Gain to Kimberly	=	[$4800000 - ($7630000 - $3610000)]
	=	$   7,80,000
Gain Recognized	=	$780000 X $240000/$4800000
	=	$       39,000