Reference no: EM132885461

Problem - Assets Acquired by Exchange Bussell Company exchanged the following assets during 2019:

a. Acquired a newer machine by paying $4,000 cash and giving up a machine that originally cost $40,000, has a book value of $25,000, and is worth $30,000.

b. Same facts as in Item a, except that the asset being surrendered has a book value of $33,000.

c. Acquired a newer machine by giving up a machine that originally cost $45,000, has a book value of $20,000, and is worth $32,000. In addition, $5,000 cash was received.

d. Same facts as in Item c, except that the asset being surrendered has a book value of $36,000.

e. Acquired a newer machine worth $90,000 by giving up a machine of equal value. The machine surrendered had originally cost $150,000 and has a book value of $80,000.

f. Same facts as in Item e, except that the asset being surrendered has a book value of $94,000.

g. Acquired a building in exchange for land that had originally cost $130,000 and is now worth $200,000.

h. Same facts as in Item g, except that $30,000 was paid.

i. Same facts as in Item g, except that $20,000 was received.

Required -

Prepare Bussell's journal entry to record each acquisition. Assume all exchanges were determined to have commercial substance.

Consider Item e. Assuming the exchange does not have commercial substance, prepare journal entries to record the exchange.

What is the justification of accounting for the exchange differently when the exchange has commercial substance versus when it does not?