Question

P10-9 (Non-Monetary Exchanges) On August 1, Hyde, Inc. exchanged productive assets with Wiggins, Inc. Hyde's asset is referred to below as Asset A, and Wiggins' 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 Hyde, Inc. Cash received by Wiggins, Inc. Asset A £96,000 40,000 60,000 15,000 Asset B £110,000 47,000 75,000 15,000 Instructions (a) Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Hyde, Inc. and Wiggins, Inc. (b) Assuming that the exchange of Assets A and B lacks commercial substance, record the exchange for both Hyde, Inc. and Wiggins, inc.

Answer 1

(a) Hyde's Asset (Asset A)

Asset B 75,000

Accumulated Depreciation 40,000

Asset A 96,000

Cash 15,000

Gain on Exchange 4,000

  Wiggin's Asset (Asset B)

Asset A 60,000

Accumulated Depreciation 47,000

Cash 15,000

Asset B 110,000

Gain on Exchange 12,000

(b) Hyde's Asset (Asset A)

Asset B 71,000

Accumulated Depreciation 40,000

Asset A 96,000

Cash 15,000

  Wiggin's Asset (Asset B)

Asset A 50,400

Accumulated Depreciation 47,000

Cash 15,000

Asset B 110,000

Gain on Exchange 2,400