Ask Question
BusinessBusiness
24 May, 07:57

Splish Company exchanged equipment used in its manufacturing operations plus $4,320 in cash for similar equipment used in the operations of Blossom Company. The following information pertains to the exchange. Splish Co. - Blossom Co. Equipment (cost) - $40,320 - $40,320 Accumulated depreciation - 27,360 - 14,400 Fair value of equipment - 18,000 - 22,320 Cash given up - 4,320a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. b) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

+4
Answers (1)
  1. 24 May, 10:42
    0
    A) without commercial substance

    Splish Company

    Dr Equipment new 17,280 (book value of old equipment + cash)

    Cr Equipment old 12,960

    Cr Cash 4,320

    Blossom Company

    Dr Equipment new 21,600 (book value of old equipment - cash)

    Dr Cash 4,320

    Cr Equipment old 25,920

    Since the boot value is less than 25% of the carrying value of the asset, no gain or loss must be recognized. When you are preparing the journal entries, you must record the carrying value of the asset + / - any boot value given or taken included in the exchange.

    B) with commercial substance

    Splish Company

    Dr Equipment new 22,320 (FMV)

    Dr Accumulated depreciation - equipment old 27,360

    Cr Equipment old 40,320

    Cr Cash 4,320

    Cr Gain on exchange 5,040

    Blossom Company

    Dr Equipment new 18,000 (FMV)

    Dr Accumulated depreciation - equipment old 14,400

    Dr Cash 4,320

    Dr Loss on exchange 3,600

    Cr Equipment old 40,320
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Splish Company exchanged equipment used in its manufacturing operations plus $4,320 in cash for similar equipment used in the operations of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
You want to open a savings account. There are five banks located in your area. The rates paid by banks A through E, respectively, are given below. Which bank should you select if your goal is to maximize your interest income?
Answers (1)
When decision makers choose to continue an existing course of action because it is the less painful option at the time, this is known?
Answers (1)
S takes out a health insurance policy which contains a provision that states that the agent does not have the authority to change the policy or waive any of its provisions. Which health policy provision is this? 1. Legal Actions 2.
Answers (1)
How u trust bx I want to know how to find the girl I love but I can't
Answers (1)
Berry Co. purchases a patent on January 1, 2021, for $33,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co.
Answers (1)
New Questions in Business
Identify whether each statement in the following table best illustrates the concept of consumers' surplus, producers' surplus, or neither.
Answers (1)
How many units would have to be sold to yield a target operating income of $26,000, assuming variable costs are $27 per unit, total fixed costs are $2,000, and the unit selling price is $32?
Answers (1)
Zane's leadership style includes delegating tasks to his employees and giving them the freedom to perform the tasks using any strategy they see fit. this demonstrates which of the critical management skills suggested by katz
Answers (1)
Coca-Cola spent $102 million through The Coca-Cola Campaign focusing on water stewardship, healthy and active lifestyles, community recycling, and education. This initiative is an illustration of a CSR program. True or False?
No Answers
Suppose the Board of Directors of The Staten Island Suppliers Co. announces on October 4th that the regular quarterly dividend of 50 cents per share will be payable to the holders of record at the close of business on November 15th 2019.
Answers (1)
Home » Business » Splish Company exchanged equipment used in its manufacturing operations plus $4,320 in cash for similar equipment used in the operations of Blossom Company. The following information pertains to the exchange. Splish Co. - Blossom Co.
Sign Up Forgot Password?