Answered: Denver Bristol Cost Accumulated…

Business

Accounting

Denver Bristol Cost Accumulated depreciation Fair value $90,000 $45,000 55,000 $25,000 30,000 30,000

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter18: Accounting For Long-term Assets

Section: Chapter Questions

Problem 3CE

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Question

Exchange of Assets Two independent companies, Denver and Bristol, each own a
warehouse, and they agree to an exchange in which no cash changes hands. The
following information for the two warehouses is available:
Required:
1. Assuming the exchange has commercial substance, prepare journal entries
for Denver and Bristol to record the exchange.
2. Assuming the exchange does not have commercial substance, prepare journal
entries for Denver and Bristol to record the exchange.
3. Next Level What is the justification of accounting for the exchange differently
when the exchange has commercial substance versus when it does not?

Denver
Bristol
Cost
Accumulated depreciation
Fair value
$90,000 $45,000
55,000 $25,000
30,000
30,000

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