Question

Novak Corporation wishes to exchange a machine used in its operations. Novak has received the following offers from other companies in the industry.

1.		Splish Company offered to exchange a similar machine plus $33,120. (The exchange has commercial substance for both parties.)
2.		Blossom Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
3.		Blue Company offered to exchange a similar machine, but wanted $4,320 in addition to Novak’s machine. (The exchange has commercial substance for both parties.)

In addition, Novak contacted Kingbird Corporation, a dealer in machines. To obtain a new machine, Novak must pay $133,920 in addition to trading in its old machine.

		Novak		Splish		Blossom		Blue		Kingbird
Machine cost		$230,400		$172,800		$218,880		$230,400		$187,200
Accumulated depreciation		86,400		64,800		102,240		108,000		–0–
Fair value		132,480		99,360		132,480		136,800		266,400

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (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 0 for the amounts.)

Assignment Gradebook ORION Downloadable Textbook PRINTER VERSION RACK NEXT CALCULATOR PULL SCREEN Novak Corporation wishes to exchange a machine used in its operations. Novak has received the following offers from other compares in the industry. 1. Splish Company offered to exchange a similar machine plus $33,120. (The exchange has comercial substance for both parties) 2. Blossom Company offered to exchange a similar machine. (The exchange ads commercial substance for both parties.) 3. Blue Company offered to exchange a similar machine, but wanted $4,320 in addition to Novak's machine. (The exchange has commercial substance for both parties.) pay $133,920 in addition to trading in as old machine. In addition, Novak contacted Kingbird Corporation, a dealer in machines. To obtain a new machine, Novak u Novak Splish Blossom Blue Kingbird Machine cost $230,400 $172,800 $218,880 $230,400 $167,200 Accumulated depreciation 86,400 64,800 102,240 108.000 Fair value 132,480 99,360 132,480 136,800 266,400 For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (Credit net Indent manually. It ne entry is required, select "Ne Entry for the account titles and enter for the amo ceed when amont entered Do No. Account Tities and Explanation 1. Novak Corporation Machinery Accumulated Deprecation-Machinery Loss on Disposal of Machinery die R2 0 Wien s. Inc. All Rights Reserved. A Division

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Answer 1

Answer -

For each of the four Independent situations, The journal entries to Record the Exchange in the books of Each Company.

No.	Account Titles and Explanation	Debit ($)	Credit ($)
1.	In the books of Novak Corporation -
	Cash [given in question] Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Loss on disposal of machine [balancing figure] Machinery [given in question]	33120 99360 86400 11520 -	- - - - 230400
	In the books of Splish Company -
	Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Loss on Disposal of Machinery [balancing figure] Cash [given in question] Machinery [given in question]	132480 64800 8640 - -	- - - 33120 172800
2.	In the books of Novak Corporation -
	Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Loss on Disposal of Machine [balancing figure] Machinery [given in question]	132480 86400 11520 -	- - - 230400
	In the books of Blossom Company -
	Machinery [balancing figure] Accumulated Depreciation-Machinery [given in question] Machinery [given in question]	116640 102240 -	- - 218880
3.	In the books of Novak Corporation -
	Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Loss on Disposal of Machine [balancing figure] Machinery [given in question] Cash [given in question]	136800 86400 11520 - -	- - - 230400 4320
	In the books of Blue Company -
	Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Cash [given in question] Machinery [given in question] Gain on Disposal of Machinery [balancing figure]	132480 108000 4320 - -	- - - 230400 14400
4.	In the books of Novak Corporation -
	Machinery [given in question] Accumulated Depreciation-Machinery [given in question] Loss on Disposal of Machine [balancing figure] Machinery [given in question] Cash [given in question]	266400 86400 11520 - -	- - - 230400 133920
	In the books of Kingbird Corporation -
	Cash [given in question] Inventory [fair value of machine of Novak Corporation] Cost of Goods Sold [machine cost of Kingbird Corporation] Sales Revenue [fair value of machine of Kingbird Corporation] Inventory [machine cost of Kingbird Corporation]	133920 132480 187200 - -	- - - 266400 187200