Answer:
Check the explanation
Explanation:
a.) Commercial Substance :
Beeman Machinery........................................................................Dr. 3,390,000
Cash............................................................................................Dr. 120,000
Accumulated Depreciation of Machinaery...............................................2,700,000
Gain on Disposal of Machinary..............................................................810,000
Machinery...........................................................................................5,400,000
Working:
Cost............................. 5,400,000
Accumulated Dep............ 2,700,000
Book Value......................................2,700,000
Face Value......................................3,510,000
Gain...............................................$ 810,000
Lacey machinery.......................................................Dr. 3,510,000
Accum Dep of Machinery...........................................Dr. 3,564,000
Gain on Disposal of Machinery.....................................474,000
Machinery.................................................................6,480,000
Cash.........................................................................120,000
b.) No Commercial Substance
Beeman Machinery.........................................................................Dr. 2,607,692
Cash.............................................................................................Dr. 120,000
Accumulated Depreciation - Machinery.............................................Dr.2,700,000
Gain on Disposal of Machinery...................................................27,692
Machinery................................................................................5,400,000
$ 120,000 / ( $ 120,000 + $ 3,390,000 ) * $ 810,000 = $ 27,692
Lacey Machinery...................................................................................Dr. $ 3,036,000
Accumulated Depreciation - Machinery...................................................Dr. $ 3564,000
Machinery...............................................................................6,480,000
Cash......................................................................................120,000
