Prater Incorporated enters into an exchange in which it gives up its warehouse o 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred FMV Warehouse $ 432,500 Original Basis $ 278,000 Accumulated Depreciation $ 55,500

Prater Incorporated enters into an exchange in which it gives up its warehouse o 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred FMV Warehouse $ 432,500 Original Basis $ 278,000 Accumulated Depreciation $ 55,500

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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3) Glenmore Reservoir Corporation paid $4,000,000 in a lump-sum purchase of land, a building, and equipment. The payment consisted of $1,500,000 cash and a note payable for the balance. An appraisal indicated the following fair values at the time of the purchase: Land $ 1,600,000 Bullding 2,500,000 Equipment 500,000 Prepare the journal entry to record this lump-sum purchase (round all percentage calculations to two decimal places).
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Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:Cash $20,000Land In the books of Tea Tree Bay Ltd the land is recordedat its cost of $100,000. It has a fair value of $140,000.Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of$50,000. The equipment has an accumulated depreciation balance of $20,000.The fair value of the equipment is $23,000Assumptionof liabilityTea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loanof $30,000 as part of the Gizmo Machine acquisition.OtherassociatedcostsTea Tree Bay Ltd also spends $5,000 as the installation cost. Testing cost was$2,500. The transportation cost for the machine was $700.During the first year of operation, the company paid $650 as the maintenance costfor the machine.Required:a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for futuredepreciation charges.b) Provide the journal entries that would appear in…
Dain's Diamond Bit Drilling purchased the following assets this year. Purchase Original Asset Date Drill bits (5-year) January 25 $ Drill bits (5-year) July 25 Commercial building April 22 Basis 102,500 113,250 266,000 Assume its taxable income for the year was $55,250 for purposes of computing the §179 expense (assume no bonus depreciation). (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Leave no answer blank. Enter zero if applicable.) c. If the January drill bits' original basis was $2,491,500, what is the maximum amount of $179 expense Dain's may deduct for the year?
3
Goodman Company exchanges an asset with The Pryce Corporation. Details of the exchange are as follows: Goodman’s Piece of equipment: Pryce’s building: Cost $800,000 Cost $960,000 Accumulated depreciation 230,000 Accumulated depreciation 350,000 Fair value 700,000 Fair value 850,000 Required- Prepare the journal entry in the books of both Goodman and Pryce, assuming both are public companies. Assume now that Goodman paid $80,000 in this transaction. Record the appropriate journal entry in Goodman books. Repeat b) assuming now that Goodman is a private company and that the fair value of Pryce’s building is the most determinable fair value.
Prater Incorporated enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred FMV Original Basis Accumulated Depreciation Warehouse $ 452,500 $ 245,000 $ 45,500 Land 99,000 99,000 Mortgage on warehouse 48,750 Cash 20,500 20,500 Assets Received FMV Land $ 523,250 What are Prater's realized and recognized gain on the exchange and its basis in the assets it received in the exchange?
During the current year, Marshall Construction trades an old crane that has an original cost $140,000 and accumulated depreciation $50,000) for a new crane from Brigham Manufacturing. Fair value of new crane is $200,000. Instructions (a) Prepare the journal entries of the exchange for Marshall Construction assuming: i. Fair value of the old crane is $100,000 and Marshall paid $100,000 to Brigham (Exchange has commercial substance); Fair value of the old crane is $100,000 and Marshall paid $100,000 to Brigham (Exchange lacks commercial substance). (b) Prepare the journal entries of the exchange for Brigham Manufacturing in (i) to (ii) above assuming the new crane cost Brigham €160,000 to manufacture and is classified as inventory. ii.
Columbia recently acquired all of Mercury's net assets in a business acquisition. The cash purchase price was $22,000,000. Mercury's assests and liabilites had the following costs and appraised values: Current assets Land, building and equipment Current liabilites Mortgage payable How much goodwill will rewult from this transaction? Cost Basis $ 6,000,000 $ 14,000,000 Appraised Value $ 6,000,000 $23,000,000 $4,000,000 $4,000,000 $ 10,000,000 $10,000,000
OCD exchanged old realty for new like-kind realty. OCD’s adjusted basis in the old realty was $31,700 ($60,000 initial cost − $28,300 accumulated depreciation), and its FMV was $48,000. Because the new realty was worth only $45,000, OCD received $3,000 cash in addition to the new realty. Required: a-1. Compute OCD's realized gain. a-2. Determine the amount and character of any recognized gain. b. Compute OCD’s basis in its new realty.
Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $16,500 (original cost of $37,000 less accumulated depreciation of $20,500) and a fair value of $9,900. Kapono paid $29,000 cash to complete the exchange. The exchange has commercial substance. Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $545,000 and a fair value of $790,000. Kapono paid $59,000 cash to complete the exchange. The exchange has commercial substance. Required: What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land? Assume the fair value of the farmland given is $436,000 instead of $790,000. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land? Assume the same facts as Requirement 1 and that the exchange lacked commercial substance. What is the amount of gain or loss that…
Sheridan Company acquires land for $71000 cash. Additional costs are as follows. Removal of shed $400 Filling and grading 1800 Salvage value of lumber of shed 170 Broker commission 1330 Paving of parking lot 12000 Closing costs 580 Sheridan will record the acquisition cost of the land as $71000. $75280. $74940. $72910.