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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- Spring '08
- Cerf
- Depreciation, Expense, ........., Generally Accepted Accounting Principles
-
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