Answered: Denver Bristol Cost Accumulated…

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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Question

Exchange of Assets Two independent companies, Denver and Bristol, each own a
warehouse, and they agree to an exchange in which no cash changes hands. The
following information for the two warehouses is available:
Required:
1. Assuming the exchange has commercial substance, prepare journal entries
for Denver and Bristol to record the exchange.
2. Assuming the exchange does not have commercial substance, prepare journal
entries for Denver and Bristol to record the exchange.
3. Next Level What is the justification of accounting for the exchange differently
when the exchange has commercial substance versus when it does not?

Denver
Bristol
Cost
Accumulated depreciation
Fair value
$90,000 $45,000
55,000 $25,000
30,000
30,000

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