Question

China Inn and Midwest Chicken exchanged assets. Midwest Chicken received equipment and gave a delivery truck. The fair value and book value of the delivery truck given were $25,600 and $28,300 (original cost of $33,400 less accumulated depreciation of $5,100), respectively. To equalize market values of the exchanged assets, Midwest Chicken received $8,100 in cash from China Inn.

1. At what amount did Midwest Chicken record the equipment?
2. How much gain or loss did Midwest Chicken recognize on the exchange?

Answer 1

A.China Inn will record delivery truck at $25,600

B.$ 10,800 loss is recognised

Step-by-step explanation:

a.

China Inn

Delivery truck (new) $25,600

Accumulated depreciation $5,100

Loss on exchange $10,800 (Balancing figure )

Equipment (old) $33,400

Cash $8,100

China Inn will record delivery truck at $25,600

b.

$ 10,800 loss is recognised