Exchange of Assets (Journal Entries)
Not what you're looking for?
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies. Show all computations.
Cowher Co. Hinson Co.
Equipment (cost) $450,000 $825,000
Accumulated depreciation 145,000 450,000
Fair market value of equipment 350,000 350,000
1. Cowher Co. and Hinson Co. traded the above equipment. The exchange has commercial substance.
2. Cowher Co. and Hinson Co. traded the above equipment. The exchange lacks commercial substance.
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.
Cowher Co. Hinson Co.
Equipment (cost) $450,000 $825,000
Accumulated depreciation 145,000 525,000
Fair market value of equipment 280,000 350,000
Cash received (paid) (70,000) 70,000
3. Cowher Co. and Hinson Co. traded the above equipment. The exchange has commercial substance.
4. Cowher Co. and Hinson Co. traded the above equipment. The exchange lacks commercial substance.
Purchase this Solution
Solution Summary
The solution explains the rationale for the difference in transactions with commercial substance and those without even though the jury is still out on how to report those transactions. The presently preferred treatment is used in the problems.
Together with the journal entries are explanations to show how amounts were calculated.
Solution Preview
Attached Excel shows the entries including the rationale and the calculations for the entries. A comment is necessary about loss on transactions with no commercial substance: there is some discussion in the literature about the accounting treatment but generally no loss is recognized.
Lacks Commercial Substance ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.