Umuhoza Corporation wishes to exchange a machine used in its operations. Umuhoza has received the following offers from other companies in the industry. Uwase Company offered to exchange a similar machine plus Rwf 57,500. (The exchange has commercial substance for both parties.) Uwimana Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.) Muhoozi Company offered to exchange a similar machine, but wanted Rwf 7,500 in addition to Umuhoza’s machine. (The exchange has commercial substance for both parties.) In addition, Umuhoza contacted Orinette Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay Rwf 232,500 in addition to trading in its old machine. Umuhoza Uwase Uwimana Muhoozi Orinette Machine cost Rwf 400,000 Rwf 300,000 Rwf 380,000 Rwf 400,000 Rwf 325,000 Accum. Depreciation 150,000 112,500 71,000 187,500 –0– Fair value 230,000 172,500 230,000 237,500 462,500 Required: For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

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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Umuhoza Corporation wishes to exchange a machine used in its operations. Umuhoza has received the following offers from other companies in the industry.

Uwase Company offered to exchange a similar machine plus Rwf 57,500. (The exchange has commercial substance for both parties.)
Uwimana Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
Muhoozi Company offered to exchange a similar machine, but wanted Rwf 7,500 in addition to Umuhoza’s machine. (The exchange has commercial substance for both parties.)
In addition, Umuhoza contacted Orinette Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay Rwf 232,500 in addition to trading in its old machine.

Umuhoza Uwase Uwimana Muhoozi Orinette

Machine cost Rwf 400,000 Rwf 300,000 Rwf 380,000 Rwf 400,000 Rwf 325,000

Accum. Depreciation 150,000 112,500 71,000 187,500 –0–

Fair value 230,000 172,500 230,000 237,500 462,500

Required:

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

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