Explanation Non-Monetary Exchange: Items in the balance sheet which cannot be converted into cash easily and include fixed assets like machinery, property, plant and equipments; represents the non-monetary exchange. These transactions do not involve any fund transfers and cash considerations. Journal entry to record the exchange, Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Cash 15,000 Accumulated depreciation -DROF truck 52,000 SMC truck new 33,000 DROF truck-old 100,000 (To record the IFRS transaction) Table (1) Cash account is the asset account. Since, cash is received due to which equity of the company is increased. Hence, cash is debited. SMC truck is the asset account. Since, the asset of the company increased. Hence, the new SMC truck account is debited. Accumulated depreciation is the nominal account. Since, accumulated depreciation is the expense for the company which is charged over the SMC truck. Hence, accumulated depreciation account is debited. Old DROF truck is the asset account. Since, the old SMC truck has been replaced with newDROF truck, due to which asset of the company decreased. Hence, DROF truck account is credited. Gain on exchange of truck is the nominal account. Since, company is getting gain on replacement of old SMC truck which increases the profit of the company that is why gain on exchange of machine account is credited. Working Notes: Calculation of the percentage of the gain recognized: Percentage of gain recognised = Cash received Total consideration received = $ 15 , 000 $ 15 , 000 + $ 51 , 000 = $ 15 , 000 $ 66 , 000 = 22.73 % Calculation of the recognized gain: Recognised gain = Unrecognised gain × Percentage of recognised gain = $18,000 × 22

1st Edition

ISBN: 9780132162302

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 11, Problem 11.39E

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To prepare: The journal entry to record the exchange on the book

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The journal entry to record the exchange on the book

Solution Summary: The author describes the journal entry to record the exchange on the book Explanation: Non-Monetary Exchange: Items in the balance sheet which cannot be converted into cash easily.

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