Question
Question 1 (20 marks) Tamdao Company exchanged machinery with a market value of $1,755,000, a recorded cost of $3,000,000, and Accumulated Depreciation of $2,350,000 with
Question 1 (20 marks)
Tamdao Company exchanged machinery with a market value of $1,755,000, a recorded cost of $3,000,000, and Accumulated Depreciation of $2,350,000 with Bavi Corporation for machinery Lacey owns. The machinery has an market value of $1,817,000, a recorded cost of $3,250,000, and Accumulated Depreciation of $1,302,000. Tamdao Ltd also gave Bavi Ltd $62,000 in the exchange. Assume depreciation has already been updated.
Required:
- Prepare the entries on both companies' books assuming that the exchange had commercial substance. (Round all computations to the nearest dollar). (7 marks)
- Prepare the entries on both companies' books assuming that the exchange lacked commercial substance. (Round all computations to the nearest dollar. (7 marks)
- What is a commercial substance? What can you conclude about the gain or loss from Part a and Part b? (6 marks)
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
