Martinez Company exchanged equipment used in its manufacturing operations plus $

Question

Martinez Company exchanged equipment used in its manufacturing operations plus $3,360 in cash for similar equipment used in the operations of Sandhill Company. The following information pertains to the exchange. Martinez Co. Sandhill Co. Equipment (cost) $31,360 $31,360 Accumulated depreciation 21,280 11,200 Fair value of equipment 14,000 17,360 Cash given up 3,360

Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Sandhill company:

Loss on disposal of equip Dr $2800

equipment Dr ????

accumulated depreciated-equipement Dr $11200

Cash Dr $3360

Equipment Cr ?????

Explanation / Answer

Solution:-

Calculatin of gain or loss:-

In the books of Martinez Co.:-

New equipment = Cash paid + fair value of old

In the books of Sandhill Co.:-

Please Rate or comment if you have any doubt regarding this solution.

Martinez Co. Sandhill Co. Fair value of old equipment 14,000 17,360 Less: book valud of equipment (31,360 - 21,280) (10,080) (31,360 - 11,200) (20,160) Gain or (loss) on exchange 3,920 (2,800)

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