Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Chapter 9, Problem 1IRP
To determine
Identify the issue for the situation given.
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Two independent companies, Denver and Bristol, each own a warehouse, and they agree to exchange them. The following information for the two warehouses is available:
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Denver
Bristol
Cost
$100,000
$62,000
Accumulated depreciation
50,000
25,000
Fair value
47,000
45,000
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Bristol agrees to pay Denver $2,000 to complete the exchange.
Required:
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Assuming the transaction has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.
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CHART OF ACCOUNTS
Denver and Bristol
General Ledger
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ASSETS
111
Cash
121
Accounts Receivable
141
Inventory
152
Prepaid Insurance
181
Building (Warehouse (new))
182
Building (Warehouse (old))
185
Equipment
198
Accumulated Depreciation
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LIABILITIES
211
Accounts Payable
231
Salaries Payable
250
Unearned Revenue
261
Income Taxes Payable
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EQUITY
311
Common Stock
331
Retained Earnings
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Assume the exchange has commercial…
Tainan company decides to exchange its old machine and $2,600,000 cash for a new machine. The old machine has a book value of $1,400,000 and a fair value of $2,400,000 on the date of the exchange. If this transaction has commercial substance, the cost of the new machine would be recorded at
Cardinals and the Rams are engaged in a nonmonetary exchange. Specifically, they will exchange their office buildings with each other. The transaction is structured as the following: Cardinals will give Rams its office building a fair market value of $13,000,000 (the original cost of the building is $5,800,000 and the accumulated depreciation on the building is $1,600,000). Rams will transfer their office building to the Cardinals. The original cost of Rams office building is $6,500,000 and the accumulated depreciation on the building is $740,000. In addition to exchanging the buildings, Rams also agrees to pay Cardinals $1,200,000 in cash and transfer 100 popcorn machines with a fair value of $100,000 (original cost of the 100 popcorn machines is $200,000 and the accumulated depreciation is $75,000). Cardinals and Rams record buildings and machines in separate accounts.
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1.) prepare the journal entry to record the exchange for the CARDINALS
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2.) prepare the journal entry to record…
Chapter 9 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 9 - Prob. 1QPDCh. 9 - Prob. 2QPDCh. 9 - Prob. 3QPDCh. 9 - Prob. 4QPDCh. 9 - Prob. 5QPDCh. 9 - Prob. 6QPDCh. 9 - Prob. 7QPDCh. 9 - Prob. 8QPDCh. 9 - Prob. 9QPDCh. 9 - Explain the difference between a substituted basis...
Ch. 9 - Prob. 11QPDCh. 9 - Prob. 12QPDCh. 9 - Prob. 13QPDCh. 9 - Prob. 14QPDCh. 9 - Prob. 15QPDCh. 9 - Prob. 1APCh. 9 - Prob. 2APCh. 9 - Prob. 3APCh. 9 - Prob. 4APCh. 9 - Prob. 5APCh. 9 - Prob. 6APCh. 9 - This year, Neil Inc. exchanged a business asset...Ch. 9 - Prob. 8APCh. 9 - Prob. 9APCh. 9 - XYZ exchanged an old building for a new like-kind...Ch. 9 - Prob. 11APCh. 9 - Prob. 12APCh. 9 - Prob. 13APCh. 9 - Prob. 14APCh. 9 - Prob. 15APCh. 9 - Prob. 16APCh. 9 - Prob. 17APCh. 9 - Prob. 18APCh. 9 - Prob. 19APCh. 9 - On October 18 of last year, a flood washed away...Ch. 9 - Prob. 21APCh. 9 - Prob. 22APCh. 9 - Prob. 23APCh. 9 - Mr. ZJ owns a sole proprietorship. The business...Ch. 9 - Prob. 25APCh. 9 - Prob. 26APCh. 9 - Prob. 27APCh. 9 - Prob. 28APCh. 9 - Prob. 29APCh. 9 - Prob. 30APCh. 9 - Prob. 31APCh. 9 - Prob. 32APCh. 9 - Prob. 33APCh. 9 - Prob. 34APCh. 9 - Prob. 1IRPCh. 9 - Prob. 2IRPCh. 9 - Prob. 3IRPCh. 9 - Prob. 4IRPCh. 9 - Prob. 5IRPCh. 9 - Prob. 6IRPCh. 9 - Prob. 7IRPCh. 9 - Prob. 8IRPCh. 9 - Prob. 9IRPCh. 9 - Prob. 10IRPCh. 9 - Prob. 1RPCh. 9 - Prob. 2RPCh. 9 - Prob. 3RPCh. 9 - Prob. 1TPCCh. 9 - Prob. 2TPCCh. 9 - Prob. 3TPCCh. 9 - Croyden is a calendar year, accrual basis...
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- Kaohsiung company exchanges its old office equipment and $85,000 for new office equipment. The old office equipment has a book value of $36,000 and a fair value of $20,000 on the date of the exchange. If this transaction has commercial substance, the cost of the new office equipment would be recorded at a.$85,000. b.$121,000. c.$105,000. d.cannot be determined.arrow_forwardTwo independent companies, Denver and Bristol, each own a warehouse and Denver agrees to pay Bristol $2,000 to complete the exchange. On January 1, they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available: Â Denver Bristol Cost $90,000 $47,000 Accumulated depreciation 50,000 20,000 Fair value 35,000 37,000 Â Â Â Â Required: Â Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.arrow_forwardTwo independent companies, Denver and Bristol, each own a warehouse. On January 1, they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available: Â Denver Bristol Cost $100,000 $63,000 Accumulated depreciation 50,000 25,000 Fair value 48,000 46,000 Â Â Â Â Bristol agrees to pay Denver $2,000 to complete the exchange. Required: Â Assuming the transaction has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.arrow_forward
- Consider each of the following independent situations: a. GYT Co. exchanges a machine that cost $4,000 and has accumulated amortization of $2,560 for a similar machine. GYT also receives $25 in the exchange. The fair market value of the old asset is $750. The fair market value of the new asset is $725. There is no commercial substance to the transaction. b. FST Co. exchanges a machine that cost $4,000 and has accumulated amortization of $3,560 for a similar machine. FST also receives $25 in the exchange. The fair market value of the old asset is $750. The fair market value of the new asset is $725. There is no commercial substance to the transaction. c. LKC Co. pays $250 and exchanges a machine that cost $3,000 and has accumulated amortization of $1,900 for a similar machine. The fair market value of the old asset is undeterminable. The fair market value of the new asset is $690. The transaction has commercial substance. d. HRT Co. pays $250 and exchanges a…arrow_forwardMetro Inc. trades its used machine for a new model at Denver Co. The used machine has a book value of $42,000 (cost $64,000) and a fair value of $50,000. Metro receives $5,000 cash from Denver.  A) Prepare the necessary journal entry by Metro to record this exchange. Assume the exchange has no commercial substance.   B) Prepare the necessary journal entry by Metro to record this exchange. Assume the exchange has commercial substance.arrow_forwardCalaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment were $20,000 (original cost of $65,000 less accumulated depreciation of $45,000) and $17,000, respectively. To equalize fair values, Calaveras paid $8,000 in cash. At what amount will Calaveras value the pickup trucks? How much gain or loss will the company recognize on the exchange? Assume the exchange has commercial substance.arrow_forward
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