Question

Whispering is a cologne retailer. During 2020, Whispering had the following non-monetary transactions.

Scenario 1: Whispering exchanged 4,700 of its common shares (FMV of $10 each) for equipment with a FMV of $51,700.

Scenario 2: Whispering traded machinery with a cost of $16,500 and accumulated depreciation of $6,600 for an inventory management equipment owned by Francis Inc. which is expected to help increase the speed with which Whispering fills its orders. An additional $3,200 was paid by Whispering in the exchange. The inventory management equipment has a cost of $18,600 and accumulated depreciation of $11,160 on Francis’ accounting records. Fair values for the machinery and the inventory management equipment are $11,000 and $14,200 respectively.

For each of the above independent scenarios, prepare the journal entry necessary to record the transaction, assuming that Whispering follows IFRS.

Answer 1

Answer
No.	Account title and Explanation	Debit	Credit
Scenario 1	Equipment (use market value)	$     51,700
	Common stock		$     51,700
	[Exchanged common shares for equipment]
Scenario 2	Equipment	$     14,200
	Accumulated depreciation-Machinery	$       6,600
	Machinery		$     16,500
	Cash		$       3,200
	Gain on disposal of machinery		$       1,100
	[Traded machinery for an inventory management equipment]