Record the purchase of these PP-E assets on January

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Question - Part a - PPE DJ Burchuv is an up and coming artist in Fort Langley. She bought her equipment on January 1, 2016. This equipment set consists of a turntable, Sony speakers and a DJ mixer, which have stand-alone prices of $8,000, $4,800 and $3,200 respectively. Burchuv negotiated to buy this equipment set as a bundled package at a total cost of $10,000.

Required - Record the purchase of these PP&E assets on January 1, 2016.

Part b - In the summer of 2020, Local Club owner Tomas, who provides high-end DJ equipment to the Langley community, offers to take DJ Burchuv Sony speakers in exchange for new Bose speakers. In addition to the trade-in of Sony speakers, Burchuv also pays $5,000 cash to close the deal. At this time the market value of the Sony speakers is estimated to be $1,500 and the market value of the Bose speakers is $7,000. At the time of disposal, the Sony speakers have accumulated depreciation of $1,464.

Required - Record the purchase of the Bose speakers on DJ Burchuv's books (assume that the exchange has commercial substance).

Briefly discuss the accounting practice for non-monetary transactions that have no commercial substance. How would the asset received from the exchange be recorded, and how to record the gain or loss resulting from the exchange?

Reference no: EM133087220

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