BMGT310 – Final Review – Important Journal Entries
Ch. 10 – Acquisition and Disposition of Property, Plant, and Equipment
Exchanges – Loss Situation:
Exchange has commercial substance, used machine BV= $8000 (original
cost of $12,000 - $4,000 accumulated depreciation), with a fair value of $6000. New model lists for
$16,000, and gets a $9,000 trade-in allowance for the used machine.
Cost of New Machine = $13,000
Accumulated Depreciation – Equipment
Loss on Disposal of Equipment
Exchanges – Gain Situation:
Exchange has commercial substance. Used trucks have combined book
value of $42,000 (cost $64,000 less $22,000 acc. Dep) Used trucks have a market value of $49,000, and
the company must pay $11,000 cash for the new truck.
Cost of New Truck = $49k (FMV) + $11k Cash
Acc. Dep – Old Trucks
Gain on Disposal of Used Trucks
Lacks Commercial Substance – No Cash Received (
Use previous data), defer gain of $7,000 and reuce
the basis of semi-truck.
Fair value (60K) – Gain Deferred (7k) = Basis of Semi Truck ($53,000)