Presented below are two independent transactions. Both transactions have commercial substance.

  1. Mercy Co. exchanged old trucks (cost $64,000 less $22,000 accumulated depreciation) plus cash of $17,000 for new trucks. The old trucks had a fair value of $38,000.
  2. Pence Inc. trandes its used machine (cost $12,000 less $4,000 accumulated depreciation) for a new machine. In addition to exchanging the old machine (which had a fair value of $11,000),, Pence also paid cash of $3,000

Instructions

  1. Prepare the entry to record the exchange of assets by Mercy Co.
  2. Prepare the entry to record the exchange of assets by Pence Inc.

Solution

a.
Mercy Co.
Journal Entry
 
b.
Pence Inc.
Journal Entry
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