Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 9, Problem 9.15SE
To determine
Exchange of plant assets: It refers to the purchase of new plant assets in exchange of old plant assets.
Commercial substance: It means that the exchange of the plant asset cause changes in the future
To Journalize: the exchange of computers of A Incorporation
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Recording Asset Exchanges
Minneapolis Inc. has equipment with an original cost of $84,000 and accumulated depreciation of $48,000. This equipment was traded in for new equipment with a list price of $96,000. The new machine can be purchased without a trade-in for $90,000 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash.
Prepare the entry to record acquisition of the new machine under each of the following separate cases.
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c. The same as in part b except that the transaction lacks commercial substance.
a.
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Dr.
Cr.
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b.
Account Name
Dr.
Cr.
Equipment (new)
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Accumulated Depreciation
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Equipment (old)
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Recording Asset Exchanges
Minneapolis Inc. has equipment with an original cost of $52,500 and accumulated depreciation of $30,000. This equipment was traded in for new equipment with a list price of $60,000. The new machine can be purchased without a trade-in for $56,250 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash.
Prepare the entry to record acquisition of the new machine under each of the following separate cases.
a. The new machine is purchased for cash with no trade-in.
b. The transaction has commercial substance. The old equipment is traded in, and $37,500 cash is paid.
c. The same as in part b except that the transaction lacks commercial substance.
a.
Account Name
Dr.
Cr.
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note…
Asset exchange with commercial substanceln 2015, Malawi Inc. exchanged equipment for two
delivery trucks. The equipment had beenpurchased for $95,000 ten years ago and has since been
fully depreciated. While the equipmentwas recently appraised at $22,000, a reliable valuation for
the trucks was not available. Thistransaction has commercial substance.InstructionsPrepare the
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Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
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