The exchange lacks commercial substance

Reference no: EM13685974

(Nonmonetary Exchange) Mathews Company exchanged equipment used in its manufacturing operations plus $6,000 in cash for similar equipment used in the operations of Biggio Company. The following information pertains to the exchange.

Mathews Co. Biggio Co.

Equipment (cost) $54,000 $54,000

Accumulated depreciation 36,000 18,000

Fair value of equipment 25,000 31,000

Cash given up 6,000

Instructions

(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

(b) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

Reference no: EM13685974

Questions Cloud

Create an application that keeps tracks of the information : Create an application that keeps tracks of the information in such a simple social network. More specifically, your application will allow for user profiles to be added to, deleted from, or looked-up in the social network.

Money supply be if banks hold no excess reserves : Presume there is $100 million of cash in existence with $40 million of it held in bank vaults as reserves. If the required reserve to checking deposit ratio is 25 percent, how large will the money supply be if banks hold no excess reserves?

Prepare the journal entries to record : Prepare the journal entries to record

Work experience problem : What do you think it would be to work for Google? In what ways might Google’s HR function have an impact on you as an employee there in terms of making your work experience better?

The exchange lacks commercial substance : Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

Futures price and change in the investors margin account : The Chicago Board of Trade has just introduced a new futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The annual risk free rate is 6%. If Brandex sto..

Derivatives problem : Consider an economy in three periods, t = 0, t = 1 and t = 2. At t = 0, the market index is trading at a value of 100. At t = 1, the index either rises to 125 with 50 percent probability, or falls to 90 with 50 percent probability. Find the price you..

Prepare the summary of the tax consequences : A. Prepare the summary of the tax consequences for the three transactions Mr. Johnson listed. Assume that the anticipated cash purchase price is $2.55 million for the noncash assets and $2.6 million for the stock.

Cost of capturing a cockatoo and transporting : Presume that the cost of capturing a cockatoo and transporting him to the United States is about $40 per bird. Cockatoos are smuggled and drugged in suitcases to the United States. Half of the smuggled cockatoos die in transit.

User Account

All Pages