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    Book Entries - Bakken and Farley Co.

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    Assume that the following cases are independent and rely on the following data. Make the necessary entries on the books of both companies.

    See attached file for data.

    Case 1: Bakken Co. and Farley Co. traded the above equipment. Assume the transaction has commercial substance.

    Case 2: Bakken Co. and Farley Co. traded the above equipment. Assume the transaction lacks commercial substance.

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    https://brainmass.com/business/accounting/book-entries-bakken-and-farley-co-211589

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    Before we start to answer this specific question, I think it is important to first understand the following concepts:
    Monetary Transactions: At least 25% of the total value is in cash. Gains and losses are always recorded
    Non-Monetary Transactions: Less than 25% of the total value is in cash. Losses are always recorded. Gains are only recorded if commercial substance exists, unless the company receives cash, in which case a partial gain can be recorded.

    Case 1:
    ** For Farley Co., this is a non-monetary transaction because cash is less than 25% of the total value in transaction (cash $84,000 / Fair Market Value $420,000 = 20%).
    The Net Book Value of the equipment ...

    Solution Summary

    This solution provides book entries for a company.

    $2.19

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