Evan and Tony companies exchanged machinery with the following: &nbs
Evan and Tony companies exchanged machinery with the following:
Evan’s Machine Tony’s Machine
Fair value $1,395,000 $1,455,000
Recorded cost 2,700,000 3,240,000
Accumulated depreciation 1,350,000 1,782,000
Cash paid 60,000
Cash received 60,000
Instructions
(a) Prepare the entriy(ies) on Tony’s books assuming that the exchange lacked commercial substance.
(b) Prepare the entry(ies) on Evan’s books assuming that the exchange had commercial substance.
Homework Answers
(a) Tony's books: Exchange lacked commercial substance
| Account Titles and Explanation | Debit | Credit |
| Machine (new) [($3240000 - $1782000) - $60000] | 1398000 | |
| Cash | 60000 | |
| Accumulated depreciation | 1782000 | |
| Machine (old) | 3240000 | |
| (To record exchange of machinery) |
(b) Evan's books: Exchange had commercial substance
| Account Titles and Explanation | Debit | Credit |
| Machine (new) [$1395000 + $60000] | 1455000 | |
| Accumulated depreciation | 1350000 | |
| Machine (old) | 2700000 | |
| Cash | 60000 | |
| Gain on disposal | 45000 | |
| (To record exchange of machinery) |
Add Answer to:
Evan and Tony companies exchanged machinery with the
following:
&nbs
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