Question

Sandhill Corporation wishes to exchange a machine used in its operations. Sandhill has received the following offers from other companies in the industry.

1.		Teal Company offered to exchange a similar machine plus $33,580. (The exchange has commercial substance for both parties.)
2.		Flint Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
3.		Buffalo Company offered to exchange a similar machine, but wanted $4,380 in addition to Sandhill’s machine. (The exchange has commercial substance for both parties.)

In addition, Sandhill contacted Carla Corporation, a dealer in machines. To obtain a new machine, Sandhill must pay $135,780 in addition to trading in its old machine.

		Sandhill		Teal		Flint		Buffalo		Carla
Machine cost		$233,600		$175,200		$221,920		$233,600		$189,800
Accumulated depreciation		87,600		65,700		103,660		109,500		–0–
Fair value		134,320		100,740		134,320		138,700		270,100

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

Answer 1

ANSWER

No	Particulars	Debit	Credit
1.	Sandhill Corporation :-
	Cash	$33,580
	Machinery	$ 100,740
	Accumulated depreciation	$87,600
	Loss on disposal of machinery [ $233,600- 87,600-  134,320]	$11,680
	Machinery		$233,600
	Teal Company :-
	Machinery	$134,320
	Accumulated depreciation	$65,700
	Loss on disposal of machinery [ $175,200- $65,700- $100,740]	$8,760
	Cash		$33,580
	Machinery		$175,200
2.	Sandhill Corporation :-
	Machinery	$134,320
	Accumulated Depreciation-Machinery	$87,600
	Loss on Disposal of Machine [ $233,600- 87,600-  134,320]	$11,680
	Machinery		$233,600
	Flint Company :-
	Machinery [ $221,920- 103,660]	$118,260
	Accumulated Depreciation-Machinery	$103,660
	Machinery		$221,920
3.	Sandhill Corporation :-
	Machinery	$138,700
	Accumulated Depreciation-Machinery	$87,600
	Loss on Disposal of Machine [ $233,600- 87,600-  134,320]	$11,680
	Machinery		$233,600
	Cash		$4,380
	Buffalo Company :-
	Machinery	$134,320
	Accumulated Depreciation-Machinery	$109,500
	Cash	$4,380
	Machinery		$233,600
	Loss on Disposal of Machinery [ $233,600- $109,500- $134,320]		$10,220
4.	Sandhill Corporation :-
	Machinery	$270,100
	Accumulated Depreciation-Machinery	$87,600
	Loss on Disposal of Machine   [ $233,600 - 87,600-  134,320]	$11,680
	Machinery		$135,780
	Cash		$233,600
	Carla Company :-
	Cash	$135,780
	Inventory	$ 134,320
	Sales Revenue		$270,100
	Cost of Goods Sold	$189,800
	Inventory		$189,800

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