Inventory methods and adjusting entries
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P10-8 (Nonmonetary Exchanges) Susquehanna Corporation wishes to exchange a machine used in its
operations. Susquehanna has received the following offers from other companies in the industry.
1. Choctaw Company offered to exchange a similar machine plus $23,000. (The exchange has commercial
substance for both parties.)
2. Powhatan Company offered to exchange a similar machine. (The exchange lacks commercial substance
for both parties.)
3. Shawnee Company offered to exchange a similar machine, but wanted $8,000 in addition to Susquehanna's
machine. (The exchange has commercial substance for both parties.)
In addition, Susquehanna contacted Seminole Corporation, a dealer in machines. To obtain a new machine,
Susquehanna must pay $93,000 in addition to trading in its old machine.
Susquehanna Choctaw Powhatan Shawnee Seminole
Machine cost $170,000 $120,000 $147,000 $160,000 $140,000
Accumulated depreciation 50,000 55,000 71,000 75,000 0
Fair value 92,000 69,000 91,000 100,000 185,000
Instructions
For each of the four independent situations, prepare the journal entries to record the exchange on the
books of each company. (Round to nearest dollar.)
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Solution Summary
Inventory methods and adjusting entries are examined.
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