Answer:
Hodge Co. Books
Debit : Building M $4,163,000
Debit : Accumulated Depreciation Building 24 $3,528,000
Credit : Cost of Building 24 $7,691,000
Fine Co. Books
Debit : Building 24 $4,283,000
Debit : Accumulated Depreciation Building 24 $4,796,000
Credit : Cost of Building 24 $9,079,000
Explanation:
Where an exchange transaction lacks commercial substance, the accounting standard IAS 16 requires that the Asset that is <em>acquired</em> is measured at the Carrying Amount of the <em>Asset given up</em>, and <u>no gain or loss</u> can be estimated reliably.
Carrying Amount is Cost of Asset <em>minus</em> Accumulated Depreciation
The Carrying Amounts for Building 24 and Building M can now be calculated as follows -
Carrying Amount :
Building 24 = $7,691,000 - $3,528,000 = $4,163,000
Building M = $9,079,000 - $4,796,000 = $4,283,000
Then, apply the Carrying Amounts as new cost of assets acquired for Both Companies as required by the standard.
