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HW_9 - Problem 10-8 Case A Requirement 1 Book value less...

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Problem 10-8 Case A. Requirement 1 Book value less fair value = loss on exchange $12,000 - 9,000 = $3,000 loss Fair value of old tractor + cash given = Initial value of new tractor $9,000 + 20,000 = $29,000 Journal entry (not required): New tractor ($9,000 + 20,000) .......................................... 29,000 Accumulated depreciation - old asset (account balance) ... 16,000 Loss ($12,000 – 9,000) ................................................................ 3,000 Cash ......................................................................... 20,000 Old tractor (account balance) ........................................ 28,000 Requirement 2 Fair value less book value = gain on exchange $14,000 - 12,000 = $2,000 gain Fair value of old tractor + cash given = Initial value of new tractor $14,000 + 20,000 = $34,000 Journal entry (not required): New tractor ($14,000 + 20,000) ........................................ 34,000 Accumulated depreciation - old asset (account balance) ... 16,000 Cash ......................................................................... 20,000 Old tractor (account balance) ........................................ 28,000 Gain ($14,000 – 12,000) .............................................. 2,000
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Problem 10-8 (continued) Case B. Requirement 1 Fair value less book value = gain on exchange $700,000 - 500,000 = $200,000 gain Fair value of old land + cash given = Initial value of new land $700,000 + 50,000 = $750,000 Journal entry (not required): New land ($700,000 + 50,000) .......................................... 750,000 Cash ......................................................................... 50,000 Old land (account balance) ........................................... 500,000 Gain ($700,000 – 200,000) ........................................... 200,000 Requirement 2 Book value less fair value = loss on exchange $500,000 - 400,000 = $100,000 loss Fair value of old land + cash given = Initial value of new land $400,000 + 50,000 = $450,000
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