Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. bob the builder purchased a land and building in y

Bob the Builder purchased a land and building in Year 6 for $4,000,000. $1.6 million...

60.1K

Verified Solution

Question

Accounting

Bob the Builder purchased a land and building in Year 6 for $4,000,000. $1.6 million of the purchase price was allocated to the land, and the balance to the building. At the time of the purchase it was estimated that the building would have a useful life of 40 years but no residual value.

In Year 18 Bob exchanged the land and building for a piece of undeveloped land. The fair market value of the assets given up was estimated to be $6.2 million and the fair value of the land to be received was $6.1 million. To make up the difference in the fair values of the assets exchanged, Bob also received $100,000 cash

Bob depreciates his buildings using the straight-line method. Bob adopts half-year convention for depreciation.

(1) Prepare the journal entry to record the exchange of the asset in Year 18 for Bob the Builder, assuming that the transaction has commercial substance (general case).

(2) Prepare the journal entry to record the exchange of the asset in Year 18 for Bob the Builder, assuming that the transaction lacks commercial substance (exception case).

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students