On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows:
Robers’ Asset | Phifer’s Asset | |||||
Original cost | $ | 155,000 | $ | 175,000 | ||
Accumulated depreciation | 83,000 | 91,000 | ||||
Fair value | 85,500 | 73,500 | ||||
To equalize the exchange, Phifer paid Robers $12,000 in cash.
Required:
Record the exchange for both Robers and Phifer. The exchange has
commercial substance for both companies. (If no entry is
required for a transaction/event, select "No journal entry
required" in the first account field.)
Journal entries | |||
Event | General Journal | DEBIT ($) | CREDIT ($) |
1 | Cash Account | 12,000.00 | |
Equipment (New) Account | 73,500.00 | ||
Accumulated Depreciation (old equipment) | 83,000.00 | ||
To Old Equipment | 155,000.00 | ||
To Gain on exchange of assets (Balancing Figure) | 13,500.00 | ||
2 | Equipment (New) Account | 85,500.00 | |
Accumulated Depreciation (old equipment) | 91,000.00 | ||
Loss on exchange of assets (Balancing Figure) | 10,500.00 | ||
To Cash Account | 12,000.00 | ||
To Equipment (Old) Account | 175,000.00 | ||
Explanation | |||
Rober's Company | |||
New equipment ($85,500 – 12,000) = $73,500 | |||
Phyfer's Company | |||
New equipment ($73,500 + 12,000) = $85,500 |
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