Question
Clarksten Co. and Kay Inc. exchange equipment. Information related to this exchange for both companies follows. Clarksten Co. Kay Inc. Equipment given up: Equipment (original
Clarksten Co. and Kay Inc. exchange equipment. Information related to this exchange for both companies follows.
| Clarksten Co. | Kay Inc. | |
|---|---|---|
| Equipment given up: | ||
| Equipment (original cost) | $60,000 | $70,000 |
| Accumulated depreciation | 20,000 | 24,000 |
| Fair value | 36,000 | 48,000 |
| Cash exchanged | (12,000) | 12,000 |
Answer the following questions, rounding your answers to the nearest whole number.
a. Record the exchange for Clarksten Co. assuming the transaction has commercial substance.
b. Record the exchange for Kay Inc. assuming the transaction has commercial substance.
c. Record the exchange for Clarksten Co. assuming the transaction lacks commercial substance.
d. Record the exchange for Kay Inc. assuming the transaction lacks commercial substance.
Note: If a line in a journal entry isn't required for a transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero)
- Exchange has commercial substance
- Exchange lacks commercial substance
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Intermediate Accounting Reporting and Analysis
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
2nd edition
9781305727557, 1285453824, 9781337116619, 130572755X, 978-1285453828
