Machinery with a fair value of $63,000 is acquired in a non-cash exchange. Below are five independent assumptions (a) to (e) as to the consideration given in the exchange: A non-interest-bearing note for $72,450 maturing in one year. Notes of similar risk required 15% interest at the date of the exchange. Cash of $23,000 plus a payment of $46,000 after 12 months. The market interest rate is 15%. Land with a book value of $37,000 and a market value of $64,000. A similar kind of used machinery with a net book value of $36,700 and a fair value of $45,800, plus cash of $16,800. When new, the used machinery cost $56,400. There will be no change in cash flows from operating activities as the result of this exchange. Inventory carried at $42,750 on the most recent balance sheet as part of a perpetual inventory carried at LCM. Cash flows are different as a result. Give the journal entry required for each of the above independent assumptions.

FV is determinable Calculate realized gain or loss Calculate realized gain or loss = FV of…

Answered: Machinery with a fair value of $63,000…

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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Machinery with a fair value of $63,000 is acquired in a non-cash exchange. Below are five independent assumptions (a) to (e) as to the consideration given in the exchange:

A non-interest-bearing note for $72,450 maturing in one year. Notes of similar risk required 15% interest at the date of the exchange.

Cash of $23,000 plus a payment of $46,000 after 12 months. The market interest rate is 15%.

Land with a book value of $37,000 and a market value of $64,000.

A similar kind of used machinery with a net book value of $36,700 and a fair value of $45,800, plus cash of $16,800. When new, the used machinery cost $56,400. There will be no change in cash flows from operating activities as the result of this exchange.

Inventory carried at $42,750 on the most recent balance sheet as part of a perpetual inventory carried at LCM. Cash flows are different as a result.

Give the journal entry required for each of the above independent assumptions.

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