Question

Bridgeport Corporation wishes to exchange a machine used in its operations. Bridgeport has received the following offers from other companies in the industry.

In addition, Bridgeport contacted Novak Corporation, a dealer in machines. To obtain a new machine, Bridgeport must pay $132,060 in addition to trading in its old machine.

                              Bridgetport        Indigo          Sweet        Pharoah    Novak

Machine Cost       $227,200        $170,400      $215,840     227,200      184,600

Accum. Dep.          85,200             63,900          100,820      106,500      0

Fair Value              130,640            97,980          130,640        134,900     262,700

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (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.)

1. Bridgeport Corp.

       5 accounts

Indigo Company

     5 accounts

2. Bridgeport Corp.

    4 accounts

Sweet Company

       3 accounts

3. Bridgeport Corp.

       5 accounts

Pharoah Company

       5 accounts

4. Bridgeport Corp.

       5 accounts

Novak Company

      3 accounts

(To Record exchange of inventory)

     2 accounts

(To record cost of inventory)

1.

 

Indigo Company offered to exchange a similar machine plus $32,660. (The exchange has commercial substance for both parties.)

2.

 

Sweet Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)

3.

 

Pharoah Company offered to exchange a similar machine, but wanted $4,260 in addition to Bridgeport’s machine. (The exchange has commercial substance for both parties.)

 



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