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    gummiesweets's Avatar
    gummiesweets Posts: 4, Reputation: 1
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    #1

    Mar 23, 2010, 05:48 PM
    Exchange of plant assets
    Corans delivery company and Enrights express delivery exchanged delivery trucks on Jan 1, 2008. Corans truck cost 22,000. It has accumulated depreciation of 15,000 and a fair market value of $4000. Enrights truck cost 10,000. It has accumulated depreciation of 8,000 and a fair market value of 4,000. The transaction has commercial substance.

    A) Journalize the exchange for Corans Delivery company
    B) Journalize the exchange for Enrights Express delivery

    This was what I got for the problem
    A)
    Cost of Corans Truck... 22,000
    Less: Accumulated Depreciation... 15,000
    Book Value... 7,000 (22,000-15,000)
    Fair market value of Corans truck... 4,000
    Loss on Disposal... 3000 (7,000-4,000)

    Fair market value of Corans truck... 4,000
    Cash paid... 10,000
    Cost of Enrights truck... 14,000(10,000+4,000)

    Journal Entry:
    Dr. Enrights truck 14,000
    Dr. Accumulated Deprecation 15,000
    Dr. Loss on Disposal 3,000
    Cr. Corans truck 22,000
    Cr. Cash 10,000

    The problem I'm not sure is the cash paid part? I just used 10,000 from the amount of Enrights truck cost.

    B)
    Cost of Enrights truck... 10,000
    Less: Accumulated Depreciation... 8,000
    Book Value... 2,000 (10,000-8,000)
    Fair market value of Enrights truck... 4,000
    Gain on disposal... (4,000-2000)

    Fair market value of Enrights truck... 4,000
    Cash paid... 22,000
    Cost of Corans Truck... 26,000 (4,000 + 22,000)

    Journal Entry:
    Dr. Corans truck... 26,000
    Dr. Accumulated Depreciation... 8,000
    Cr. Gain on Disposal... 2,000
    Cr. Enrights truck... 10,000
    Cr. Cash... 22,000

    Also same thing, I don't know if cash paid part is right? I used 22,000 from the amount of Corans truck cost.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Mar 26, 2010, 08:23 PM

    Where are you coming up with the 10,000 of cash? As far as I can tell, you're creating that out of thin air because there's no mention of it in the problem. You've got the right concept if you'll dump the cash part and re-calculate based on that being missing.

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