Question

The Bronco Corporation exchanged land for equipment. The land had a book value of $134,000 and a fair value of $178,000. Bronco paid the owner of the equipment $24,000 to complete the exchange which has commercial substance. Required: 1. What is the fair value of the equipment? 2. Prepare the journal entry to record the exchange.

Answer 1

Answer:

1. $202,000

Explanation:

1. Fair value of the equipment:

= Land Fair Value + Additional cash paid for Equipment

= $178,000 + $24,000

= $202,000

2. The journal entry is as follows:

Equipment A/c   Dr. $202,000

   To Land                                    $134,000

   To cash                                    $24,000

   To Gain in Asset Exchange    $44,000

(To record the exchange)