Question

Cheyenne Corporation wishes to exchange a machine used in its operations. Cheyenne has recelved the following offers from other companies in the industry. 1. Ayayai Company offered to exchange a similar machine plus $30,820. (The exchange has commercial substance for both parties.) 2. Pina Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.) 3. Grouper Company offered to exchange a similar machine, but wanted $4,020 in addition to Cheyenne's machine. (The exchange has commercial substance for both parties.) In addition, Cheyenne contacted Monty Corporation, a dealer in machines. To obtain a new machine, Cheyenne must pay $124,620 in addition to trading in its old machine. Cheyenne Ayayai Pina Grouper Monty Machine cost Accumulated depreciation Fair value $214,400 $160,800 $203,680 $214,400 $174,200 80,400 60,300 95,140 100,500 123,280 92,460 123,280 127,300 247,900 For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts) Debit No. Account Titles and Explanation 1. Cheyenne Corporation Credit

Answer 1

Answer:

Situation No. 1
	Cheyenne Corporation	Ayayai
Book value of machinery	1,34,000	1,00,500
Fair value	1,23,280	92,460
Gain/(loss) on disposal of machinery	-10,720	-8,040
Journal entry in books of Cheyenne Corporation
Cash	$30,820
Machinery	$92,460
Accumulated Depreciation	$80,400
Loss on disposal of machinery	$10,720
Machinery		2,14,400
Journal entry in books of Ayayai Company
Machinery	$123,280
Accumulated Depreciation	$60,300
Loss on disposal of machinery	$8,040
Cash		$30,820
Machinery		$160,800
Situation No. 2
Journal entry in books of Cheyenne Corporation
Machinery	$123,280
Accumulated Depreciation	$80,400
Loss on disposal of machinery	$10,720
Machinery		$214,400
Journal entry in books of Pina Company
Machinery	$108,540
Accumulated Depreciation	$95,140
Machinery		$203,680
Situation No. 3
Journal entry in books of Cheyenne Corporation
Machinery	$127,300
Accumulated Depreciation	$80,400
Loss on disposal of machinery	$10,720
Cash		$4,020
Machinery		$214,400
Journal entry in books of Grouper Company
Machinery	$123,280
Accumulated Depreciation	$100,500
Cash	$4,020
Gain on disposal of machinery		$13400
Machinery		$214,400
Situation No. 4
Journal entry in books of Cheyenne Corporation
Machinery	$247,900
Accumulated Depreciation	$80,400
Loss on disposal of machinery	$10,720
Cash		$124,620
Machinery		$214,400
Journal entry in books of Monty Corporation
Cash	$124,620
Used machine inventory	$123,280
Sales		$247,900
(To record Exchange of inventory)
Cost of goods sold	$174,200
Machinery inventory		$174,200
(To record Cost of inventory)