Question

Pina Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment...

Pina Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment used in the operations of Grouper Company. The following information pertains to the exchange.

Pina Co.

Grouper Co.

Equipment (cost)

$34,720 $34,720

Accumulated depreciation

23,560 12,400

Fair value of equipment

15,500 19,220

Cash given up

3,720

Part 1

Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Homework Answers

Answer #1
Calculation of Gain or Loss:
Arruza($) LoBianco($)
Fair Value of Old Equipment 15500 19220
Less: Book Value of Equipment -11160 -22320
Gain (or Loss) on Exchange 4340 -3100
(a) Lacks Commercial Substance
Company Account Title and Explanation Debit Credit
Arruza Equipment (11160 + 3720) 14880
Accumulated Depreciation 23560
Equipment 34720
Cash 3720
(Being equipment exchanged)
LoBianco Equipment (New) 15500
Accumulated Depreciation 12400
Cash 3720
Loss on exchange 3100
Equipment(Old) 34720
(Being equipment exchanged)
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