prepare the journal entries to record the exchange on the books of soon yoon co assu 610327

This exercise will allow you to practice recording the exchange of plant assets when the exchange has commercial substance. Soon Yoon Company exchanged equipment used in its manufacturing operations plus $5,000 in cash for delivery equipment used in the operations of Peggy Gunshanan Company. The exchange is determined to have commercial substance because the timing and the amount of the cash flows arising from the delivery equipment will likely differ significantly from the cash flows arising from the manufacturing equipment. The following information pertains to the exchange.

Soon Yoon Co.

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Peaav Gunshanan Co.

Equipment (cost)

$28,000

$28,000

Accumulated depreciation

22,000

10,000

Fair market value of equipment

10,500

15,500

Cash given up

5,000

Instructions

  1. Prepare the journal entries to record the exchange on the books of Soon Yoon Co.
  2. Prepare the journal entries to record the exchange on the books of Soon Yoon Co. assuming the fair value of Soon Yoon Co.”s old asset is $5,500 (rather than $10,500) and the fair value of Peggy Gunshanan”s old equipment is $10,500 (rather than $15,500). (Assume the rest of the facts are unchanged.)
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