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Hoyle Company owns a manufacturing plant with a fair value of $4,600,000, a recorded cost of $8,500,000, and accumulated depreciation of $3,650,000. Patterson Company owns a warehouse with a fair value of $4,400,000, a recorded cost of $6,900,000, and accumulated depreciation of $2,800,000. Hoyle and Patterson exchange assets, with Hoyle also receiving cash of $200,000 from Patterson. The exchange is considered to have commercial substance.

Required:
Record the exchange on the books of:
a. Hoyle
b. Patterson

Respuesta :

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Answer:

A. Hoyle

Dr Warehouse $4,400,000

Dr Cash $200,000

Dr Accumulated depreciation $3,650,000

Dr Loss on sale of asset $250,000

Cr Manufacturing plant $8,500,000

B. Patterson

Dr Manufacturing plant $4,600,000

Dr Accumulated depreciation $2,800,000

Cr Gain on sale of asset

$300,000

Cr Warehouse $6,900,000

Cr Cash $200,000

Explanation:

A. Preparation of the Jounal entry to Record the exchange on the books of Hoyle

Dr Warehouse $4,400,000

Dr Cash $200,000

Dr Accumulated depreciation $3,650,000

Dr Loss on sale of asset $250,000

(8,500,000-4,400,000-200,000-3,650,000)

Cr Manufacturing plant $8,500,000

B. Preparation of the Jounal entry to Record the exchange on the books of Patterson

Dr Manufacturing plant $4,600,000

Dr Accumulated depreciation $2,800,000

Cr Gain on sale of asset

$300,000

(4,600,000+2,800,000-6,900,000-200,000)

Cr Warehouse $6,900,000

Cr Cash $200,000