Question

During the current year, Nash Construction trades an old crane that has a book value of $91,800 (original cost $142,800 less accumulated depreciation $51,000) for a new crane from Crane Manufacturing Co. The new crane cost Crane $168,300 to manufacture and is classified as inventory. The following information is also available.

		Nash Const.			Crane Mfg. Co.
Fair value of old crane		$83,640
Fair value of new crane					$204,000
Cash paid		120,360
Cash received					120,360

Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Nash Construction and (2) Crane Manufacturing.

Assuming that this exchange lacks commercial substance for Nash, prepare the journal entries on the books of (1) Nash Construction and (2) Crane Manufacturing.

*This is a multi-step problem but I have had issues with these 2 sections.

Answer 1

Having commercial customer
Nash Const
	Dr	Cr
Equipment ($83640 + $120360)	204,000
Accumulated Depreciation—Equipment	51,000
Loss on Disposal of Plant Assets (bal fig)	8,160
Equipment		142800
Cash		120360
Crane books
Cash	$120,360
Equipment Inventory	83640
Sales		$204,000
Cost of good sold	$168,300
Equipment Inventory		$168,300
b) Lacking commercial substance
same entries as for Mash there is loss and for crane Nash is a customer
Nash Const
	Dr	Cr
Equipment ($83640 + $120360)	204,000
Accumulated Depreciation—Equipment	51,000
Loss on Disposal of Plant Assets (bal fig)	8,160
Equipment		142800
Cash		120360
Crane books
Cash	$120,360
Equipment Inventory	83640
Sales		$204,000
Cost of good sold	$168,300
Equipment Inventory		$168,300