Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Question
Chapter 9, Problem 9.28E
1.
To determine
Exchange of plant assets: It refers to the purchase of new plant assets in exchange of old plant assets.
Commercial substance: It means that the exchange of the plant asset cause changes in the future cash flows as more revenue will generate from the new plant asset due to an increase in its productivity. Thus, if the revenue earned or expenses incurred changes in the future due to the exchange of plant assets, then it will be referred as the exchange has a commercial substance.
To record: the
2.
To determine
To record: the journal entry of Bank C’s trade-in of old fixtures for new ones.
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Monty Corp. exchanges old delivery equipment for new delivery equipment. The book value of the old delivery equipment is $37,200 (cost $67,200 less accumulated depreciation $30,000). Its fair value is
$23,100, and cash of $6,000 is paid. Prepare the entry to record the exchange, assuming the transaction has commercial substance. (Credit account titles are automatically indented when amount is entered. Do
not indent manually. If no entry isrequired,select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
Item 22
Below is information relative to an exchange of similar assets by a company. Assume the exchange has commercial substance.
Old Equipment
Cash
Book Value
Fair Value
Paid
$ 49,700
$ 60,500
$ 14,100
The company would record the new equipment at:
Clark Co. and Keys Inc. exchange equipment. Information related to this exchange follows.
Equipment given up:
Clark Co. Keys Inc.
Accumulated depreciation
Equipment (original cost)
$54,000 $63,000
18,000 21,600
32,400 43,200
(10,800) 10,800
Fair value
Cash exchanged
Required
a. Record the exchange for Clark Co. assuming the transaction has commercial substance.
b. Record the exchange for Keys Inc. assuming the transaction has commercial substance.
c. Record the exchange for Clark Co. assuming the transaction lacks commercial substance.
d. Record the exchange for Keys Inc. assuming the transaction lacks commercial substance.
Exchange has Commercial Substance
Exchange Lacks Commercial Substance
a. Record the exchange for Clark Co. assuming the transaction has commercial substance.
b. Record the exchange for Keys Inc. assuming the transaction has commercial substance.
a.
Account Name
Dr.
Cr.
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
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