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Exchange of Assets

Please see attachment.

Exchange of Assets.
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.
Bakken Co. Farley Co.
Equipment (cost) $540,000 $990,000
Accumulated depreciation 174,000 540,000
Fair market value of equipment 420,000 420,000

1. Bakken Co. and Farley Co. traded the above equipment. They are dissimilar productive assets.
Bakken Co.'s Books: Farley Co.'s Books:

2. Bakken Co. and Farley Co. traded the above equipment. They are similar productive assets.
Bakken Co.'s Books: Farley Co.'s Books:

Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.
Bakken Co. Farley Co.
Equipment (cost) $540,000 $990,000
Accumulated depreciation 174,000 630,000
Fair market value of equipment 336,000 420,000
Cash received (paid) (84,000) 84,000

3. Bakken Co. and Farley Co. traded the above equipment. They are dissimilar productive assets.
Bakken Co.'s Books: Farley Co.'s Books:

4. Bakken Co. and Farley Co. traded the above equipment. They are similar productive assets.
Bakken Co.'s Books: Farley Co.'s Books:

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Exchange of Assets.
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.
Bakken Co. Farley Co.
Equipment (cost) $540,000 $990,000
Accumulated depreciation 174,000 540,000
Fair market value of equipment 420,000 420,000

1. Bakken Co. and Farley Co. traded the above equipment. They are dissimilar productive assets.
Bakken Co.'s Books: Farley Co.'s Books:

Since the assets are dissimilar, they would be recorded at fair value with the difference between the fair value and book value as a loss or gain
Bakken Co.
The book value of equipment is 540,000-174,000=366,000 and it is exchanged for equipment with a fair value of 420,000 from Farley. The gain on exchange is 420,000-366,000=54,000. The journal entry is
Equipment (new) Dr 420,000
Accumulated Depreciation Dr 174,000
Equipment (old) Cr 540,000
Gain on Exchange Cr 54,000

Farley Co.
The book value is 990,000-540,000=450,000. The fair value of exchanged equipment is 420,000. There is a loss on $30,000 on exchange. The journal entry is
Equipment ...

Solution Summary

The solution explains the journal entries relating to exchange of assets

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