Impatiens Company exchanged machinery with an appraised value of $585,000, a rec

Question

Impatiens Company exchanged machinery with an appraised value of $585,000, a recorded cost of $900,000, and accumulated depreciation of $450,000 with Pansy Corporation for machinery Pansy owns. The machinery has an appraised value of $565,000, a recorded cost of $1,080,000, and accumulated depreciation of $594,000. Pansy also gave Impatiens $20,000 cash in the exchange. Assume depreciation has already been recorded up to the date of the exchange. Prepare the general journal entries, in proper form, necessary to record the above transaction on the books of both companies, assuming the exchange has commercial substance. Omit explanations. Round all calculations to the nearest whole dollar. Prepare the general journal entries, in proper form, necessary to record the REQUIRED: (1) (2) on the books of both companies, assuming the exchange lacks commercial substance. Omit explanations. Round all calculations to the nearest whole dollar.

Explanation / Answer

Books of Impatiens
Date Particulars Debit Credit
$ $
Cash A/c 20000
Machinery A/c 565000
Accumulated Depreciation A/c 450000
                         To profit on exchange A/c 135000
                         to Machinery A/c 900000
Books of Pansy
Date Particulars Debit Credit
$ $
Machinery A/c 565000
Accumulated Depreciation A/c 594000
                         To profit on exchange A/c 59000
                         ToCash 20000
                         to Machinery A/c 1080000

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