Property, Plant, and Equipment: Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue. To Prepare: The journal entries to record the exchange on the books of Company S.

Question

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Answer 1

Question

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

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KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors.

Accounting Question

REQUIRED Study the information given below and answer the following questions. Where discount factors are required use only the four decimals present value tables that appear after the formula sheet or in the module guide. Ignore taxes. 5.1 Calculate the Accounting Rate of Return on average investment of the second alternative (expressed to two decimal places). 5.2 Determine which of the two investment opportunities the company should choose by calculating the Net Present Value of each alternative. Your answer must include the calculation of the present values and NPV. 5.3 Calculate the Internal Rate of Return of the first alterative (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION The management of Bentall Incorporated is considering two investment opportunities: (5 marks) (9 marks) (6 marks) The first alternative involves the purchase of a new machine for R900 000 which…

Answer 2

Question

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

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Answer 3

Question

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

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Answer 4

Question

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

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Answer 5

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

Answer 6

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

Answer 7

Chapter 10, Problem 10.6P

To determine

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

To Prepare: The journal entries to record the exchange on the books of Company S.

Answer 8

Expert Solution & Answer

Explanation of Solution

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cash		140,000
	New Building		1,260,000
	Accumulated depreciation – Old building		1,200,000
	Old Building			2,000,000
	Gain on exchange of assets			600,000
	(To record the exchange on the books of R Company.)

Table (1)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)−Cash paid= $1,400,000–$140,000=$1,260,000

Determine the gain on exchange of assets.

Gain on exchange of asset = ((Fair value of Company S's asset)−(Original cost of Company S's asset − Accumulated depreciation) )= ($1,400,000)–($2,000,000–$1,200,000)=$1,400,000−$800,000=$600,000

Cash is an asset account, and increased. Therefore, debit Cash account with $140,000.
New Building increases the asset account. Hence, debit New Equipment account with $1,260,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $1,200,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $2,000,000.
Gain on sale of exchange of assets increases the equity by $10,000. Hence, credit Gain on sale of exchange of assets with $600,000.

Prepare the journal entries to record the exchange on the books of Company E.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	New Building		1,400,000
	Accumulated depreciation – Old Building		650,000
	Cash			140,000
	Old Building			1,600,000
	Gain on exchange of buildings			310,000
	(To record the exchange on the books of P Company.)

Table (2)

Working note:

Determine the value of new building.

Value of building = Fair value (Building)+Cash paid= $1,260,000+$140,000=$1,400,000

Determine the gain on exchange of buildings.

Gain on exchange of buildings = ((Fair value of Company E's asset)−(Original cost of Company E's asset − Accumulated depreciation) )= ($1,260,000)–($1,600,000–$650,000)=$1,260,000−$950,000=$310,000

New Building increases the asset account. Hence, debit New Equipment account with $1,400,000.
Accumulated depreciation – old asset is a contra asset. It increases the value of asset account. Therefore, debit Accumulated Depreciation with $650,000.
Cash is an asset account and decreased. Therefore, credit Cash account with $140,000.
Old Building is an asset account, and decreased. Therefore, credit Old Equipment account with $1,600,000.
Gain on exchange of buildings increases the equity by $310,000. Hence, credit Gain on exchange of buildings with $310,000.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 10 - Prob. 10.1Q Ch. 10 - Prob. 10.2Q Ch. 10 - Prob. 10.3Q Ch. 10 - Prob. 10.4Q Ch. 10 - Prob. 10.5Q Ch. 10 - Prob. 10.6Q Ch. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9Q Ch. 10 - Prob. 10.10Q

Solution Summary: The author explains that property, plant, and equipment refers to the fixed assets that are acquired by a company to be used in its business activities, for generating revenue.

Explanation of Solution

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