Problem:
During the current year, Garrison Construction trades an old crane that has a book value of $80,000 (original cost $140,000 less accumulated depreciation $60,000) for a new crane from Keillor Manufacturing Co. the new crane cost Keillor $165,000 to manufacture and is classified as inventory. The following information is also available.
Garrison Const.
Fair market value of old crane - 72,000
Cash paid - 118,000
Keillor Mfg. Co.
Fair market value of new crane - 190,000
Cash received - 118,000
Q1. Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.
Q2. Assuming that this exchange lacks commercial substance for Garrison, prepare the journal entries on the books of Garrison Construction.
Q3. Assuming the same facts as those in A, except that the fair market value of the old crane is $98,000 and the cash paid is $92,000, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.
Q4. Assuming the same facts as those in B, except that the fair market value of the old crane is $87,000 and the cash paid $103,000, prepare the journal entries on the books of (1) Garrison Construction and (2) Keillor Manufacturing.