Question

Cedric Company recently traded in an older model of equipment for a new model. The old model’s book value was $270,000 (original cost of $590,000 less $320,000 in accumulated depreciation) and its fair value was $300,000. Cedric paid $70,000 to complete the exchange which has commercial substance.

Required:
Prepare the journal entry to record the exchange. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

The Bronco Corporation exchanged land for equipment. The land had a book value of $122,000 and a fair value of $154,000. Bronco received $12,000 from the owner of the equipment to complete the exchange which has commercial substance.
   
Required:
1. What is the fair value of the equipment?
2. Prepare the journal entry to record the exchange.

Answer 1

Solution 1:

Journal Entries
Event	Particulars	Debit	Credit
1	Accumulated depreciation - Equipment Dr	$320,000.00
	Equipment - New Dr	$370,000.00
	To Equipment - Old		$590,000.00
	To Gain on sale of equipment		$30,000.00
	To Cash		$70,000.00
	(to record exchange of equipment for equipment)

Solution 2-1:

Fair value of equipment = Fair value of land sold - Cash received = $154,000 - $12,000 = $142,000

Journal Entries
Event	Particulars	Debit	Credit
1	Cash Dr	$12,000.00
	Equipment Dr	$142,000.00
	To Land		$122,000.00
	To Gain on sale of Land		$32,000.00
	(to record exchange of Land for equipment)