Topic: Property, Plant , and Equipment

River Company plans to dispose of an equipment in one of several ways:

Equipment old 2,000,000

Accumulated depreciation 700,000

Fair value 1,500,000

1. The equipment is exchanged for a vacant lot whose fair value is P1,700,000.

2. The equipment is exchanged for a used equipment also valued at P1,500,000. The cash flows of the asset given and the cash flows of the asset received do not differ.

3. The equipment is exchanged for a used equipment valued at P2,000,000. River Company pays P500,000 in the exchange.

Required :

1. Compute the amount that will be capitalized as the cost of the new asset in each of the above independent exchange assumptions. (3 answers, 1 each assumption)

2. Prepare the journal entry for each of the above exchange transactions (3 journal entries)