Edmond Company and Rosen Corporation Journal Entries for Exchange of Equipment
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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 Preview
See the attached excel sheet for the entries.
Definitions:
Commercial substance: Recognize gain or loss.
Cost of asset received = ...
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