Y2 Prepare journal entries for both companies assuming that the exchange has no commercialsubstance. Exchanges of Property, Plant, and EquipmentCompanies ordinarily account for the exchange of nonmonetary assets on the basis of the fairvalue of the asset given up or the fair value of the asset received, whichever is more evident.Losses in nonmonetary exchanges are always recognized. Gains are recognized if the exchangehas commercial substance (i.e., when future cash flows change as a result of the transaction).When an exchange has no commercial substance, gains are recognized for the fraction of cash orother monetary consideration received relative to the fair value of all assets received. Theremaining gains are deferred.Example (E9-20 modified)Tony LoBianco Company exchanged equipment used in its manufacturing operations plus$3,000 in cash for similar equipment used in the operations of Arruza Company. The followinginformation pertains to the exchange.LoBiancoArruzaEquipment (cost)Accumulated DepreciationFair value of equipmentCash given upWhat is the Gain/Loss for these two companies on this exchange?$28,00010,00012,5003,000$28,00019,00015,500Prepare journal entries for both companies assuming that the exchange has commercialsubstance.

Asset exchange: It is an arrangement in which two parties exchange their assets. This exchange can…

Example (E9-20 modified) Tony LoBianco Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of Arruza Company. The following information pertains to the exchange. LoBianco Arruza Equipment (cost) Accumulated Depreciation Fair value of equipment Cash given up What is the Gain/Loss for these two companies on this exchange? $28,000 10,000 12,500 3,000 $28,000 19,000 15,500 Prepare journal entries for both companies assuming that the exchange has commercial substance.

Example (E9-20 modified) Tony LoBianco Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of Arruza Company. The following information pertains to the exchange. LoBianco Arruza Equipment (cost) Accumulated Depreciation Fair value of equipment Cash given up What is the Gain/Loss for these two companies on this exchange? $28,000 10,000 12,500 3,000 $28,000 19,000 15,500 Prepare journal entries for both companies assuming that 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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