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Prepare the journal entries on the books of gbc construction

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Reference no: EM132600707

In 2020, GBC Construction ltd trade into relatively new small milling machines ( milling Machines no MM6 and MM7) for a larger milling machine that GBC expects will be more useful for the particular contacts that the company has to fulfill over the next couple of years. The new milling machine was acquired from Humber Manufacturing Inc. which has agreed to take the smaller equipment as trade as trade-ins and also pay $17500 cash to GBC. The new milling machine cost Humber $165000 to manufacture and is classified as inventory. The following information is available.

                                                                               GBC                                     Humber

Cost of milling machine = MM6                     120,000

Cost of milling machine = MM7                     110,000

Accumulation depreciation = MM6                  15,000

Accumulation Depreciation =MM7                   18,000

Fair value= MM6                                         128,000

Fair value= MM7                                          87,500

Fair value of new crane                                                                       198,000

Cash paid                                                                                           17,500

Cash received                                             17,500

Instructions

Question A) Assume that this exchange has commercial substance. Prepare the journal entries on the books of (1) GBC Construction and 2) Humber Manufacturing. Humber uses a perpetual inventory system.

Question B) Assume that this exchange lacks commercial Substance. Prepare the journal entries on the books of 1) GBC Construction and 2) Humber Manufacturing. Humber uses a perpetual inventory system.

Reference no: EM132600707

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