Question

Kingbird Company exchanged equipment used in its manufacturing operations plus $4,200 in cash for similar equipment used in the operations of Oriole Company. The following information pertains to the exchange.

Kingbird Co.Oriole Co.
Equipment (cost)$39,200 $39,200
Accumulated depreciation26,600 14,000
Fair value of equipment17,500 21,700
Cash given up4,200
Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

Answer 1

Books of the Kingbird Co.

Date Particular Debit $ Credit $

Equipment - New (balancing figure) a/c Dr 17,200

Accumulated depreciation (old a/c) Dr 26,600

To, Equipment - Old 39,200

To Cash a/c 4,200

Books of the Oriole Co.

Equipment - New (39,200 - 14,000 - 4,200) a/c Dr 21,000

Accumulated depreciation a/c Dr 14,000

Cash a/c Dr 4,200

To Equipment - Old a/c 39,200

Step-by-step explanation:

Books of the Kingbird Co.

Date Particular Debit $ Credit $

Equipment - New (balancing figure) a/c Dr 17,200

Accumulated depreciation (old a/c) Dr 26,600

To, Equipment - Old 39,200

To Cash a/c 4,200

Books of the Oriole Co.

Equipment - New (39,200 - 14,000 - 4,200) a/c Dr 21,000

Accumulated depreciation a/c Dr 14,000

Cash a/c Dr 4,200

To Equipment - Old a/c 39,200