Question

On March 1, year 1, Marvin Corporation promises to unconditionally transfer a building that cost $125,000...

On March 1, year 1, Marvin Corporation promises to unconditionally transfer a building that cost $125,000 with an appraised value of $175,000 to Valerie Corporation on March 1, year 2 for a vehicle that was recently purchased for $140,000. As of December 31, year 2, Marvin Corporation has not transferred title to the building. Marvin Corporation received the vehicle. How should Marvin Corporation and Valerie Corporation record these transactions?

Homework Answers

Answer #1

The main point to remember in this question is that the marvin corporation didn't transfer the building.

Books of Marvin corporation

Journal entries:

Date General Journal Debit Credit
03/01/year 2

Asset- vehicle a/c

Loss on exchange

To Accounts payable-Valerie corporation a/c

(Being vehicle recieved from valerie corporation)

$140,000

$35,000

$175,000

**Assumption : the accumulated depreciation is Nil.

Books of Valerie corporation

Journal entries:

Date General Journal Debit Credit
03/01/year 2

Accounts receivable-Marvin corporation a/c

To Vehicle a/c

(Being vehicle sold to Marvin corporation)

$140,000

$140,000

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