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    student007's Avatar
    student007 Posts: 60, Reputation: 2
    Junior Member
    		  
    #1

    Sep 28, 2006, 11:42 AM
    Accounting for trading assets.
    Let's say there are 2 companies: A and B.
    A has a capital asset:
    cost = 100
    accum. Amort = 20

    B has a capital asset
    cost = 200
    accum. Amort = 35

    Both have a market value of between 150 and 300.

    If these companies choose the trade the assets with each other, what entries would take place?

    Here's what I think (from A'a point of view)
    Cr. Equipment 100
    Dr. Accum. Amort 20
    then what?

    and for the acquisition of the other asset:
    Dr. Equipment 200 (or do I dr equipment by 200-35?)

    Thanks.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
    Ultra Member
    		  
    #2

    Sep 28, 2006, 07:06 PM
    When no cash is exchanged, it is a Nonmonetary transaction.

    Then the question becomes whether there is commercial substance or not.
    The general rule is that if your economic situation has changed due to this transaction, then commercial substance existed. However, if your economic situation has not changed, then there is no commercial substance to it.


    Nonmonetary exchange, no commercial substance
    Company A
    Dr. Accumulated Amortization 20
    Dr. New Asset 80
    Cr. Old Asset 100

    Company B
    Dr. Accumulated Amortization 35
    Dr. New Asset 165
    Cr. Old Asset 200


    Nonmonetary exchange, with commercial substance
    - would need to know the FMV of the assets to properly calculate
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