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    AB company and XY company agree to exchange assets Gain/Loss

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    Part 1
    Equipment purchased on Jan, 1 2004 and installed Jan 15. Use began on Jan 30. The following amounts were expenditures related to the equipment ( all amounts are considered material).
    Invoice price 100,000
    Discount of 2% taken for paying within 10 days
    Delivery charges 1,000
    Set up costs 2,500
    Repair of asset prior to installation 3,000
    Costs of training employees to use equipment 5,000
    Increase electricity and ventilation costs for equipment 4,000
    Costs of repair of equipment,incurred on July 1st 6,000
    Direct materials costs for a base built for equipment 5,400
    Overhead costs for building base for equipment 3,600

    Calculate total amount that should be considered acquisition cost of the equipment for depreciation purposes.

    Part 2
    AB company and XY company agree to exchange assets. see the following information:

    AB Company-------------------- XY Company
    Original cost 50,000--------------- 60,000
    Accum. depr. 30,000 --------------- 40,000
    Fair Market Value 24,000 ---------- 30,000

    AB company agrees to pay 6,000 cash to XY company in the exchange.

    Required:
    1. assuming the assets are considered dissimilar assets, make the necessary journal entries to record the exchange for both parties.
    2. Assuming the assets are considered similar assets, make the necessary journal entries to record the exchange for both parties.

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    https://brainmass.com/business/accounting/company-company-agree-exchange-assets-gain-loss-357719

    Solution Summary

    A discussion is 341 words, showing journal entries and shows how the dissimilar and similar changes the outcomes.

    $2.19

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