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meghna
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Joined: 21 Jun 2009
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Posted: 15 Apr 2010 at 19:12 \| IP Logged

Hi all,

can anyone confirm whther I did the correct J E fo rthe follwing :

Hagen exchanged a truck with a carrying amount of 12,000 and Fv of 20,000 for a truck and 5000 cash.FV of truck received was 15,000. The exchange was not considered to have commercial substance.At what amount ?

Answer : 15,000.

Transaction is monetary as boot received is 25% of the consideration exchaned.

Boot received/(Boot received +FMV of truck received)=

5000/20,000 =25%

So journal entry would be :

Truck Dr. 15000

cash Dr. 5,000

Old truck Cr 12000

gain Cr. 8,000...

Is this correct JE?

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venchlu
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Joined: 18 Aug 2009
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Posted: 16 Apr 2010 at 11:27 \| IP Logged

I think you are correct.

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venchlu
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Posted: 16 Apr 2010 at 11:29 \| IP Logged

Oh..sorry..i think you didn't do it right.

Boot received/(Boot received +FMV of truck received)=

5000/20,000 =25%

($20,000-$12,000 ) X 25%= 2,000

Dr- New Truck 9,000

Dr- Cash 5,000

Cr- Old truck 12,000

Cr-Gain 2,000

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venchlu
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Posted: 16 Apr 2010 at 11:32 \| IP Logged

Oh..Again, I didn't notice if it is 25 %, we recognize the whole gain. Yes, you JE is correct then. Sorry for the confusion.

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aimedcpa
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Joined: 16 Dec 2008
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Posted: 16 Apr 2010 at 12:43 \| IP Logged

Yup......... Meghna u r 100% correct.

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