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?
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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