Exchange of Machinery and Cash Payment between Schumann and Barber
What is the value of the machinery exchanged between Schumann and Barber?
The machinery exchanged between Schumann and Barber has an appraised value of $2,500,000.
What was the book value of the machinery owned by Barber?
The book value of the machinery owned by Barber was $1,600,000.
What were the journal entries for Schumann and Barber in this transaction?
What were the journal entries for Schumann and Barber in this transaction?
Provide the journal entries for both Schumann and Barber, assuming the transaction is of commercial substance.
When considering the exchange of machinery with an appraised value of $2,500,000 and a book value of $1,000,000, along with a cash payment of $500,000 between Schumann and Barber, the journal entries were as follows:
For Schumann:
- Debit Machinery (with the appraised value of $2,500,000)
- Credit Machinery (with the book value of $1,000,000)
- Credit Accumulated Depreciation (with the accumulated depreciation of $2,000,000)
- Debit Cash (with $500,000)
For Barber:
- Debit Machinery (with the book value of $1,600,000)
- Credit Machinery (with the appraised value of $2,500,000)
- Debit Accumulated Depreciation (with the accumulated depreciation of $2,500,000)
- Credit Cash (with $500,000)
These journal entries ensure that the exchange of machinery and cash payment between Schumann and Barber is accurately recorded in their accounting records.