Home / Questions / Exchange of Assets Youth Development Co acquired the following assets in exchange for var...
Exchange of Assets
Youth Development Co. acquired the following assets in exchange for various nonmonetary assets.
2008
Mar. 15 Acquired from another company a large lathe in exchange for three small lathes. The small lathes had a total cost of $36,000 and a remaining book value of $13,000. The new lathe had a market value of $19,000, approximately the same value as the three small lathes. This transaction is deemed NOT to have commercial substance.
June 1 Acquired 250 acres of land by issuing 2,500 shares of common stock with par value of $1 and market value of $85. Market analysis reveals that the market value of the stock was a reasonable value for the land.
July 15 Acquired a used piece of heavy, earth-moving equipment, market value, $105,000, by exchanging a used molding machine with a market value of $30,000 (book value, $6,000; cost, $42,000) and land with a market value of $95,000 (cost, $50,000). Cash of $20,000 was received by Youth Development Co. as part of the transaction.
Aug. 15 Acquired a patent, franchise, and copyright for two used milling machines. The book value of each milling machine was $3,500, and each originally cost $12,000. The market value of each machine is $15,000. It is estimated that the patent and franchise have about the same market values, and the market value of the copyright is 50% of the market value of the patent.
Nov. 1 Acquired a new packaging machine for four old packaging machines. The old machines had a total cost of $60,000 and a total remaining book value of $15,000. The new packaging machine has an indicated market value of $40,000, approximately the same value as the four machines. This transaction is deemed to have commercial substance.
Instructions: Prepare the journal entries required on Youth Development Co.’s books to record the exchanges.
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