Question

Kerry, Inc., exchanged land and cash of $8,900 for equipment. The land had a book value of $64,000 and a fair value of $69,900.

Required:
Prepare the journal entry to record the exchange. Assume the exchange has commercial substance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Step-by-step explanation:

The journal entry is shown below:

Equipment A/c Dr $78,800

To Gain on exchange A/c $5,900

To Land A/c $64,000

To Cash A/c $8,900

(Being the exchange is recorded and the remaining balance is credited to the gain on exchange account)

The equipment value is computed below:

= Fair value + exchange value

= $69,900 + $8,900

= $78,800