Hanson Ltd provides consulting services to The Bowen Ltd. Rather than paying in cash, it is agreed that The Bowen Ltd will transfer some machinery to Hanson Ltd. The machinery is recorded in The Bowen Ltd’s accounts at a cost of $175,500 with accumulated depreciation of $65,500. The fair value of the machinery is assessed as being $165,500.

 

Required:

1. a) Should Hanson Ltd record the transfer of machinery at carrying amount (cost minus accumulated depreciation) or at fair value? 

1. b) Provide the necessary journal entries for Hanson Ltd to recognize revenue to be received from The Bowen Ltd.