Question

Jordan Company exchanged machinery with an appraised value of $1,170,000 a recorded cost of $1,800,000 and Accumulated Depreciation of $900,000 with Nile Corporation for machinery Nile owns. The machinery has an appraised value of $1,140,000 a recorded cost of $2,160,000 and accumulated depreciation of $1,188,000 . Nile also gave Jordan $30,000 in the exchange. Assume depreciation has already been updated.

instructions

a) prepare the entries on both companies' books assuming that it is considered an exchange with commercial substance. round all calculations to the nearest dollar

b) prepare the entries on both companies books assuming that it is considered exchange with no commercial substance round all calculations to the nearest dollar  

Answer 1

a. Commercial Substance
S. No.	General Journal	Debit	Crediit
a.	Machinery	$1,140,000.00
	Accumulated Depreciation on Machienry	$900,000.00
	Cash	$30,000.00
	Gain on Disposal of Machienry (BF)		$270,000.00
	Machinery		$1,800,000.00
	In the Bookes of Jordan Company
	Machinery	$1,170,000.00
	Accumulated Depreciation on Machienry	$1,188,000.00
	Gain on Disposal of Machienry		$168,000.00
	Cash		$30,000.00
	Machinery		$2,160,000.00
	In the Books of Nile Corporation
b. No Commercial Substance
S. No.	General Journal	Debit	Crediit
b.	Machinery (bal)	$870,000.00
	Accumulated Depreciation on Machienry	$900,000.00
	Cash	$30,000.00
	Machinery		$1,800,000.00
	In the Bookes of Jordan Company
	Machinery (bal)	$1,002,000.00
	Accumulated Depreciation on Machienry	$1,188,000.00
	Machinery		$2,160,000.00
	Cash		$30,000.00
	In the Books of Nile Corporation