Asset A Asset B Account Titles and Explanation Debit Credit Teal, Inc.’s Books F
ID: 2437607 • Letter: A
Question
Asset A
Asset B
Account Titles and Explanation
Debit
Credit
Teal, Inc.’s Books
Flint, Inc.’s Books
LINK TO TEXT
Account Titles and Explanation
Debit
Credit
Teal, Inc.’s Books
Flint, Inc.’s Books
On August 1, Teal, Inc. exchanged productive assets with Flint, Inc. Teal’s asset is referred to below as “Asset A,” and Flint’ is referred to as “Asset B.” The following facts pertain to these assets.Asset A
Asset B
Original cost $111,360 $127,600 Accumulated depreciation (to date of exchange) 46,400 54,520 Fair value at date of exchange 69,600 87,000 Cash paid by Teal, Inc. 17,400 Cash received by Flint, Inc. 17,400Explanation / Answer
Exchange has commercial substance:
New asset is recorded at fair value of old asset + cash paid - cash received
Exchange lacks commercial substance:
New asset is recorded at book value of old asset + cash paid - cash received
No gain or loss on exchange since recorded at book value
Account Titles and Explanation Debit Credit Teal, Inc.'s Books Machinery (B) 87000 Accumulated depreciation-machinery (A) 46400 Machinery (A) 111360 Cash 17400 Gain on disposal of machinery 4640 Flint, Inc.'s Books Cash 17400 Machinery (A) 69600 Accumulated depreciation-machinery (B) 54520 Machinery (B) 127600 Gain on disposal of machinery 13920