Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 10, Problem 23E
1.
To determine
Ascertain the book value of the old tractor at the time of exchange.
2.
To determine
Ascertain the amount of loss incurred during the asset exchange.
3.
To determine
State the amount that should be recorded in the asset account for the new tractor.
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Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000(original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid$20,000 cash to complete the exchange. The exchange has commercial substance.Required:1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value ofthe new tractor?2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.
Assume that Abdul Baari LLC acquiring a new truck for OMR 45000. In exchange, the company pays OMR 32000 cash and old truck. The old truck originally cost OMR 40000 and has accumulated depreciation of OMR 25,000, which implies a OMR 15,000 book value at the time of exchange. From the following given options identify the correct journal entry for profit or loss on exchange of old truck with new truck.
a.
Dr New Truck A/C OMR 45000 Dr Loss on exchange of old Truck OMR 2000 and cash A/c 32000 Cr old Truck A/c OMR 15000
b.
None of the given options
c.
Dr New Truck A/C OMR 47000 and Cr Cash A/c 32000 Cr Old truck A/c 15000
d.
Dr New Truck A/c OMR 45000 Dr Loss on exchange of truck OMR 2000 Dr Accumulated depreciation on old Truck OMR 25000 and Cr cash A/c 32000 Cr Old Truck A/C OMR 40000
Clear my choice
Maxim Company exchanged a used machine with a book value of $26,000 (cost $54,000 less $28,000 accumulated depreciation) and cash of $8,000
for a delivery truck. The machine has a estimated fair market of $36,000. The transaction has commercial substance. Regarding the journal entry to
record the exchange, what value will be assigned to the delivery truck?
O 36,000
O 44,000
O 54,000
O 34,000
Question 17
The cost of training employees to operate newly acquired machinery are usually capitalized as part of the acquisition value of the asset.
O True
Chapter 10 Solutions
Principles of Financial Accounting.
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