Question

Wildhorse Company exchanged equipment used in its manufacturing operations plus $3,240 in cash for similar equipment used in the operations of Sheffield Company. The following information pertains to the exchange.Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

	Wildhorse Co.			Sheffield Co.
Equipment (cost)		$30,240			$30,240
Accumulated depreciation		20,520			10,800
Fair value of equipment		13,500			16,740
Cash given up		3,240

Answer 1

Answer:

Wildhorse Co.
Date	Accounts title and Explanations	Debit ($)	Credit ($)
	Equipment (New)(30240+3240-20520)	12,960
	Accumulated depreciation	20,520
	Equipment		30,240
	Cash		3,240
	(To record exchange of equipment recorded)
Sheffield Co.
Date	Accounts title and Explanations	Debit ($)	Credit ($)
	Cash	3,240
	Equipment(new)	13,500
	Loss on exchange(30240-3240-13500-10800)	2,700
	Accumulated depreciation	10,800
	Equipment		30,240
	(To record exchange of equipment recorded)