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QUESTION

Holyfield Corporation wishes to exchange a machine used in its operations. Holyfield has received the following offers from other companies in the industry. 1. Dorsett Company offered to exchange a si

Holyfield Corporation wishes to exchange a machine used in its operations.

Holyfield has received the following offers from other companies in the industry.

1. Dorsett Company offered to exchange a similar machine plus $23,000. (The exchange has commercial substance for both parties.)

2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)

3. Liston Company offered to exchange a similar machine, but wanted $3,000 in addition to Holyfield’s machine. (The exchange has commercial substance for both parties.)

In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine,

Holyfield must pay $93,000 in addition to trading in its old machine.

Date Amount

July 30, 2014 $ 900,000

January 30, 2015 1,500,000

May 30, 2015 1,600,000

Total payments $4,000,000

Holyfield Dorsett Winston Liston Greeley

Machine cost $160,000 $120,000 $152,000 $160,000 $130,000

Accumulated depreciation 60,000 45,000 71,000 75,000 –0–

Fair value 92,000 69,000 92,000 95,000 185,000

Instructions

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

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****************** Corporation ****** ** exchange * ******* used ** its ******************* *** ******** the ********* ****** from other ********* ** *** ********* ******* ******* ******* ** ******** * ******* ******* **** $23000 (The exchange has ********** substance for both ********* ******* Company ******* to ******** * similar ******* **** ******** ***** ********** substance *** both ********* Liston ******* ******* to exchange a ******* machine *** ****** $3000 in addition to ************* machine **** exchange *** ********** ********* *** **** parties)In ******** ********* ********* ******* *********** * dealer ** ******** To obtain * *** **************** **** *** $93000 ** ******** to ******* ** *** old machineDate ********** ** **** * ************* ** **** 1500000May 30 **** ************ ******** $4000000Holyfield ******* Winston ****** ************** **** ******* ******* $152000 $160000 ****************** depreciation ***** ***** ***** ***** *********** ***** 92000 ***** 92000 ***** ********************* each ** *** **** *********** ********** prepare *** journal ******* ** ****** *** exchange on *** ***** ** **** ************************ ********************* 23000  Machinery69000  Accumulated ************************************* ** ******** ** ****************** ******************************* ** loss: **** ****************** ***** **** ***** 92000    Loss$ ******************* ****************************************** ************************************* ** Disposal ** ****************** Cash 23000  ******************************* ** ***** **** value$ *********** ***** **** ***** *********** ***** ******************** ********************************************** ************************************* ** Disposal ** ***************** Machinery 160000  Winston ********************** ******* – **************************** Depreciation—Machinery71000   ******************************* ** **** deferred: **** value$92000    ***** Book value *********** **** ************************************ ********************************************** ************************************* ** ******** ** ***************** ******************* Cash 3000  Liston ****************************************** ********************************************* ******************* **** ** ******** of Machinery 10000*     *Fair ****** **************** Book value **************** ****************** *** ******** *** ********** substance *** ****** **** ****** ** ********************** Corporation   Machinery185000  Accumulated ************************************* on Disposal of Machinery8000   Machinery 160000  ********************** ******************************************** Sales ***************************** ** Goods ************** ***********************

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