Nonmonetary exchanges for garrison construction

Reference no: EM1355919

During the current year, Garrison Construction trades an old crane that has a book value of $80,000 (original cost $140,000 less accumulated depreciation $60,000) for a new crane from Keillor Manufacturing Co. the new crane cost Keillor $165,000 to manufacture and is classified as inventory. The following information is also available.

Garrison Const.
Fair market value of old crane - 72,000
Cash paid - 118,000

Keillor Mfg. Co.
Fair market value of new crane - 190,000
Cash received - 118,000

A - Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.

B - Assuming that this exchange lacks commercial substance for Garrison, prepare the journal entries on the books of Garrison Construction.

C - Assuming the same facts as those in A, except that the fair market value of the old crane is $98,000 and the cash paid is $92,000, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.

D - Assuming the same facts as those in B, except that the fair market value of the old crane is $87,000 and the cash paid $103,000, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.

Reference no: EM1355919

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