Nonmonetary exchange (18 points) Hodge Co. exchanged Building 24 which has an ap

Question

Nonmonetary exchange (18 points) Hodge Co. exchanged Building 24 which has an appraised value of $3,200,000, a cost of $5,060,000, and accumulated depreciation of $2,400,000 for Building M belonging to Fine Co. Building M has an appraised value of $3,008,000, a cost of $6,020,000, and accumulated depreciation of $3,168,000. The correct amount of cash was also paid. Assume depreciation has already been updated. Instructions: Prepare the entries on both companies' books assuming the exchange had no commercial substance. Show a check of the amount recorded for Building M on Hodge's books. (Round to the nearest dollar.) Show and label all calculations.

Explanation / Answer

Net Asset Value of Building 24 and Building M are:

Amount of cash paid by Fine Co. to Hudge Co. on the difference of appraisal of both the Buildings is $192,000.

Entries in the Books of Hodge Co. :

1. Building M A/c -------- Dr. 3,008,000

Building 24 A/c 2,660,000

Buiding appriation A/c 348,000

2. Cash A/c ------- Dr. $192,000

To Building appraisal A/c $192,000

Entries in the Books of Fine Co. :

1. Building 24 A/c ------------- Dr. $3,200,000

To Building M A/c $2,852,000

To Buliding Appraisal A/c $ 348,000

2. Building Appriation A/c ------- Dr. $192,000

To Cash A/c $192,000

Initially owned by Asset cost price $ (A) accumulated depreciation (B) Depreciated Asset Value$ (C)=(A - B) Appraised Value (D) Net Value (C - D) Hodge Co. Building 24 $5,060,000 $2,400,000 $2,660,000 $3,200,000 - $540,000 Fine Co. Building M $6,020,000 $3,168,000 $2,852,000 $3,008,000 - $156,000 CASH PAID $192,000

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