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PROBLEM 15 Points Jared Cono, a recorded cost exchanged machineryW and Accumulated Deprec andKay owns with an appraised value of $1,7350,000 with kay Corporation fo 69,00, y aso gave ochinery hasmachinery Kay owns. That of $1,350 has an appraised value of $16 of $1,78 3,240 m3240.000, and Accumulated Depredation odepreciation has already been $2 with Kay Corporation for a5,000, a recorded cost of me updated. ted ash umul Instructions A) Prepermmercial substance. (Round all the entries on both companies books assuming that the exchange bodations to the nearest dollar.) (B) Prepare the entries on both lacked commercial substance. companies books assuming that the exchange Round computations to the nearest dollar.) Round all computations to the neage PROBLEM II 10 Points xyz Corp. had been using the LIFO inventory method through December 31, 2017. As of January 1, 2018, XYZ changed to the FIFO method. The following information is available regarding inventory: LIFQ FIFO Inventory at 12/31/17 $10,000 $14,000 On May 1, 2018, after the 2017 books had been closed, XYZ discovered that it had erroneously overstated its 2017 revenue by $20,000. Additional information Retained Earnings Balance, 12/31/17 2018 Net Income 2018 Dividends income tax rate $300,000 95,000 13,000 25% Instructions Prepare a statement of retained earnings for 2018 only.
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Requirement-A: When an exchange has commercial substance, fair value of the assets exchanged shall be taken into account. Accordingly, new asset shall be recorded at fair market value of the new asset. Debit Credit $1,755,000 $1,782,000 e & Equipment Accumulated Depreciation - Equipment [Fair value of asset received] [Accumulated dep. of old asset] $3,240,000 [Cost of the old asset] Equipment Cash Gain on Disposal of Equipment $237,000 [Balancing Figure] (To record exchange of the Equipment)Account Title & Explanation Cash Equipment Accumulated Depreciation - Equipment Debit $60,000 Credit [Fair value of asset received] $1,350,000 [Accumulated dep. of old asset] Equipment Gain on Disposal of Equipment $2,700,000 [Cost of the old asset] $405,000 [Balancing figure] Requirement-(B When an exchange has no commercial substance, fair value of the assets exchanged shall not be taken into account. Accordingly, cost of new asset shall be the sum of book value of old asset exchanged and cash paid.Account Title & Explanation Equipment Accumulated Depreciation - Equipment Debit $1,518,000 $1,782,000 Credit [Balancing Figure] [Accumulated dep. of old asset] $3,240,000 [Cost of the old asset] Equipment Cash $60,000 [Given] To record exchange of the Equipment) In the books of Jared Compan Account Title & Explanation Cash Equipment Accumulated Depreciation - Equipment Debit Credit $60,000 $1,290,000 $1,350,000 [Fair value of asset received] [Balancing figure] [Accumulated dep. of old asset] $2,700,000 [Cost of the old asset] Equipment To record exchange of the Equipment)

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