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Yesterday, 22:27

Vaughn Company exchanged equipment used in its manufacturing operations plus $4,020 in cash for similar equipment used in the operations of Bramble Company. The following information pertains to the exchange.

Vaughn Co. Bramble Co.

Equipment (cost) $37,520 $37,520

Accumulated depreciation 25,460 13,400

Fair value of equipment 16,750 20,770

Cash given up 4,020

Required:

(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

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Answers (1)
  1. Yesterday, 22:42
    0
    Answer and Explanation:

    The journal entries are shown below:

    For Vaughn:

    Equipment $16,080

    Accumulated Depreciation $25,460

    To Equipment $37,520

    To Cash $4,020

    (Being the exchange is recorded)

    For Bramble:

    Equipment (new) $16,750

    Accumulated Depreciation $13,400

    Cash $4,020

    Loss on exchange (balance item) $3,350

    To Equipment (old) $37,520

    (Being the exchange is recorded)

    Only these entries are passed and it attains lacking of commercial substance
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Home » Business » Vaughn Company exchanged equipment used in its manufacturing operations plus $4,020 in cash for similar equipment used in the operations of Bramble Company. The following information pertains to the exchange. Vaughn Co. Bramble Co.
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