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Preparing Entries for Two Companies

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Edmond Company exchanged machinery with an appraised value of $1,755,000, a recorded cost of $2,700,000 and Accumulated Depreciation of $1,350,000 with Rosen Corporation for machinery Rosen owns. The machinery has an appraised value of $1,695,000, a recorded cost of $3,240,000, and Accumulated Depreciation of $1,782,000. Rosen also gave Edmond $60,000 in the exchange. Assume depreciation has already been updated.

Instructions
(a) Prepare the entries on both companies' books assuming that the exchange had commercial substance. (Round all computations to the nearest dollar).
(b) Prepare the entries on both companies' books assuming that the exchange lacked commercial substance. (Round all computations to the nearest dollar).

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Solution Summary

The solution prepares entries for two companies.

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Instruction A
Edmond Company
DR: Cash 60,000
DR: Machinery (new) 1,695,000
DR: Accumulated depreciation (old) 1,350,000
CR: Gain 405,000
CR: Machinery ...

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