**Nonmonetary Exchange Case Study: Busytown Corporation****Scenario:**Busytown Corporation, a shoe manufacturer, hired a new college graduate for its accounting department. On the employee's first day, the accountant was tasked with totaling a batch of invoices using an adding machine. Unfortunately, unfamiliar with such a device, the accountant broke it.In response, Busytown Corporation traded the broken machine, along with $340, to Dick Tracy Business Machine Company for a new machine. Below is detailed information about the machines involved in this exchange:**Machine Details:**- **Busytown Corp. (Old Machine):** - Machine Cost: $290 - Accumulated Depreciation: $140 - Fair Value: $85- **Dick Tracy Co. (New Machine):** - Machine Cost: $270 - Accumulated Depreciation: $0 - Fair Value: $425**Instructions:**For each company, prepare the necessary journal entry to record the exchange, considering that the exchange has commercial substance.This task involves analyzing the values and entries associated with the exchange of assets, focusing on how to handle asset swaps in accounting records. In particular, it seeks to demonstrate the implications of nonmonetary exchanges with commercial substance on financial statements.

Particulars Amount Net Book value of the old machine ($290-$140) $150 Less: Fair value…

E10.17 (LO 3) (Nonmonetary Exchange) Busytown Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Busytown Corporation gave the machine plus $340 to Dick Tracy Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines. Busytown Corp. (Old Machine) Dick Tracy Co. (New Machine) Machine cost $290 $270 Accumulated depreciation 140 -0- Fair value 85 425 Instructions For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.)

E10.17 (LO 3) (Nonmonetary Exchange) Busytown Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Busytown Corporation gave the machine plus $340 to Dick Tracy Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines. Busytown Corp. (Old Machine) Dick Tracy Co. (New Machine) Machine cost $290 $270 Accumulated depreciation 140 -0- Fair value 85 425 Instructions For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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