Question

On August 1, Bridgeport, Inc. exchanged productive assets with Indigo, Inc. Bridgeport's asset is referred to below as "Asset A and Indigo' is referred to as "Asset B." The following facts pertain to these assets. Original cost Accumulated depreciation (to date of exchange) Fair value at date of exchange Cash paid by Bridgeport, Inc. Cash received by Indigo, Inc. Asset A $117,120 48,800 73,200 18,300 Asset B $134,200 57,340 91,500 18,300 Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Bridgeport, Inc. and Indigo, Inc. in accordance with generally accepted accounting principles. (Round answers to 0 decimal places, e.g. 5,275. when amount is entered. Do not indent manually. I "No Entry" for the account titles and enter for the amounts.) Debit Credit Account Titles and Explanation Bridgeport, Inc.'s Books Assuming that the exchange of Assets A and Blacks commercial substance, record the exchange for both Bridgeport, Inc. and Indigo, Inc. in a places eg. 58,971. Credit account titles are auto...ally inac.......lount is entered. Do not indent manually. If no entry is required, select "Na Debit Credit Account Titles and Explanation Bridgeport. Inc.'s Books Machinery (B) Machinery (A) Cash Accumulated Depreciation-Machinery (B) Gain on Disposal of Machinery Accumulated Depreciation-Machinery (A) Machinery (B) Machinery (A) Accumulated Depreciation Machinery (B) Accumulated Depreciation Machinery (A) Gain on Disposal of Machinery Cash Indigo, Inc.'s Books Indigo, Inc.'s Books

Answer 1

ANSWER

Journal entries when asset exchanged is having commercial substance.

Has Commercial Substance
	Shamrock Inc.
Date	Particulars	L.F	Amount ($)	Amount ($)
	Asset B (Fair value)		91,500
	Accumulated depreciation (Book Value)		48,800
	Asset A (Book Value)			117,120
	Cash			18,300
	Gain on sale of equipment (73,200- (117,120-48,800)			4,880
	(For equipment exchanged)
	Bridgeport
Date	Particulars	L.F	Amount ($)	Amount ($)
	Asset A (fair value)		73,200
	Cash		18,300
	Accumulated depreciation (Book Value)		57,340
	Gain on exchange of equipment			14,640
	Asset B (Book Value)			134,200
	(For equipment exchanged)

When asset is not having commercial substance

No Commercial Substance
	Shamrock Inc.
Date	Particulars	L.F	Amount ($)	Amount ($)
	Asset B		86,620
	Accumulated depreciation (Book Value)		48,800
	Asset A (Book value)			117,120
	Cash			18,300
	(For equipment exchanged)
	Bridgeport
Date	Particulars	L.F	Amount ($)	Amount ($)
	Asset A		58,560
	Cash		18,300
	Accumulated depreciation (Book Value)		57,340
	Asset B (Book Value)			134,200
	(For equipment exchanged)

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