3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Textbook Question

Chapter 11, Problem 11.38E

Exchanges Lacking Commercial Substance, Cash Received. Brown Company contracts with Sebastian Company to exchange refrigerated trucks. Brown Company will trade three SMC trucks for four DROF trucks owned by Sebastian Company. The DROF refrigerated trucks have a cost of $100,000 and accumulated depreciation up to the date of the exchange of $52,000. The trucks are approximately the same age and have the same remaining useful lives. The fair value of the SMC trucks is $51,000 with a book value of $38,000 (cost $65,000 less $27,000 accumulated depreciation). The DROF trucks have a fair value of $66,000, and Brown Company gives $15,000 in cash (paid) in addition to the SMC trucks.

Prepare the journal entry to record the exchange on the books of the Sebastian Company. Assume that the exchange does not have commercial substance.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 11, Problem 11.37E

Chapter 11, Problem 11.39E

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Chapter 11 Solutions

Intermediate Accounting

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Solution Summary: The author describes the journal entry to record the exchange on the book Explanation: Non-Monetary Exchange: Items in the balance sheet which cannot be converted into cash easily.

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