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

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

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