Question

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

Scenario 1: Kingbird exchanged 5,500 of its common shares (FMV of $10 each) for equipment with a FMV of $60,500.

Scenario 2: Kingbird traded machinery with a cost of $14,000 and accumulated depreciation of $5,600 for an inventory management equipment owned by Francis Inc. which is expected to help increase the speed with which Kingbird fills its orders. An additional $3,000 was paid by Kingbird in the exchange. The inventory management equipment has a cost of $18,800 and accumulated depreciation of $11,280 on Francis’ accounting records. Fair values for the machinery and the inventory management equipment are $9,500 and $12,500 respectively.

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

No.	Account Titles and Explanation	Debit	Credit
Scenario 1
Scenario 2

Answer 1

No.	Account Titles and Explanation	Debit	Credit
Scenario 1	Equipment	55000
	To Common Stock Account		55000
	(Being equipment obtained in exchange of 5500 Common shares at a FMV of $10 each)
Scenario 2
	Inventory Management Equipment	9,500
	Accumulated Depreciation-Machinery	5,600
	To Machinery		14,000
	To Gain on Exchange		1,100
	(Being Equipment obtained in exchange of Machinery, and Recorded at the FMV of asset transferred and gain on exchange recognized)

Notes

	FMV	Cost	Acc. Depreciation
Machinery	9,500	14,000	5,600
Inventory Management Equipment	12,500	18,800	11,280

Hope you understood. Thank you.