Question

Kingbird Company exchanged equipment used in its manufacturing operations plus $4,200 in cash for similar equipment used in the operations of Oriole Company. The following information pertains to the exchange.
Kingbird Co.Oriole Co.
Equipment (cost)$39,200 $39,200
Accumulated depreciation26,600 14,000
Fair value of equipment17,500 21,700
Cash given up4,200
Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

Answer 1

Answer:

Books of the Kingbird Co.

Date Particular            Debit $               Credit $

Equipment - New (balancing figure) a/c Dr   17,200

Accumulated depreciation (old a/c) Dr         26,600  

To, Equipment - Old                             39,200

To Cash a/c                        4,200

Books of the Oriole Co.

Equipment - New (39,200 - 14,000 - 4,200) a/c Dr 21,000  

Accumulated depreciation a/c Dr    14,000  

Cash a/c Dr                 4,200  

To Equipment - Old a/c          39,200

Explanation:

Books of the Kingbird Co.

Date Particular            Debit $               Credit $

Equipment - New (balancing figure) a/c Dr   17,200

Accumulated depreciation (old a/c) Dr         26,600  

To, Equipment - Old                             39,200

To Cash a/c                        4,200

Books of the Oriole Co.

Equipment - New (39,200 - 14,000 - 4,200) a/c Dr 21,000  

Accumulated depreciation a/c Dr    14,000  

Cash a/c Dr                 4,200  

To Equipment - Old a/c          39,200