Assume that the following cases are independent and rely on the following data.

Question

Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.

                                                                                                         Jensen Co.            Merton Co.

            Equipment (cost)                                                                  $900,000            $1,650,000

            Accumulated depreciation                                                     290,000                 900,000

            Fair value of equipment                                                          700,000                 700,000

1.   Jensen Co. and Merton Co. traded the above equipment. The exchange has commercial substance.

            Jensen Co.'s Books:                                       Merton Co.'s Books:

2.   Jensen Co. and Merton Co. traded the above equipment. The exchange lacks commercial substance.

            Jensen Co.'s Books:                                       Merton Co.'s Books:

Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.

                                                                                                         Jensen Co.            Merton Co.

            Equipment (cost)                                                                  $900,000            $1,650,000

            Accumulated depreciation                                                     290,000              1,050,000

            Fair value of equipment                                                          560,000                 700,000

            Cash received (paid)                                                            (140,000)               140,000

3.   Jensen Co. and Merton Co. traded the above equipment. The exchange has commercial substance.

            Jensen Co.'s Books:                                       Merton Co.'s Books:

4.   Jensen Co. and Merton Co. traded the above equipment. The exchange lacks commercial substance.

            Jensen Co.'s Books:                                       Merton Co.'s Books:

Explanation / Answer

Jensen Co.'s Books Equipment Accum. Depreciation Gain on Exchange Equipment 825,000 2. Equipment Accum. Depreciation Equipment 3. Equipment Accum. Depreciation Loss on Exchange Equipment 50,000 Cash 825,000 4. Same as 3. 350,000 145,000 45,000 450,000 305,000 145,000 450,000 350,000 145,000 25,000 450,000 70,000 Comprehensive Exam C Merton Co.'s Books Equipment Accum. Depreciation Loss on Exchange Equipment Same as 1. 350,000 450,000 25,000 Equipment Accum. Depreciation Cash Gain on Exchange Equipment Equipment Accum. Depreciation Cash Gain on Exchange Equipment 280,000 525,000 70,000 240,000 525,000 70,000 10,000 825,000 [$70,000 ($70,000 + $280,000) $50,000 = $10,000 gain]

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.