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16 September, 18:30

On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows: Robers' Asset Phifer's Asset Original cost $ 145,000 $ 165,000 Accumulated depreciation 75,000 83,000 Fair value 82,500 72,500 To equalize the exchange, Phifer paid Robers $10,000 in cash. Required: Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 16 September, 21:33
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    In Robers Company:

    Debit Accumulated depreciation $75,000

    Debit Equipment $72,500

    Debit Cash $10,000

    Credit Equipment $145,000

    Credit Gain on exchange asset $12,500

    In Phifer Corporation

    Debit Accumulated depreciation $83,000

    Debit Equipment $82,500

    Debit Loss on exchange asset $9,500

    Credit Cash $10,000

    Credit Equipment $165,000

    Explanation:

    In Robers Company:

    Book value of the equipment = $145,000 - $75,000 = $70,000

    Fair value of the equipment: $82,500 > Book value

    The company will record gain on exchange:

    Debit Accumulated depreciation $75,000

    Debit Equipment $72,500

    Debit Cash $10,000

    Credit Equipment $145,000

    Credit Gain on exchange asset $12,500

    In Phifer Corporation

    Book value of the equipment = $165,000 - $83,000 = $82,000

    Fair value of the equipment: 72,500 < Book value of the equipment

    The company will record loss on exchange:

    Debit Accumulated depreciation $83,000

    Debit Equipment $82,500

    Debit Loss on exchange asset $9,500

    Credit Cash $10,000

    Credit Equipment $165,000
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