Correct Journal Entries

Assignment 5. Spring 2024
I. Prepare a journal entry for the following unrelated transactions:
A) Denver Company has used machine. The used machine has a book value of $8,000 (original cost of
$12,000, accumulated depreciation of $4,000). Denver discarded the machine.
B) Denver Company has used machine. The used machine has a book value of $8,000 (original cost of
$12,000, accumulated depreciation of $4,000). Denver sold the machine for $10,000.
C) Denver Company exchanged an old truck and $25,500 cash for a new truck. The old truck had a book
value of $6,000 (original cost of $25,000 less $19,000 in accumulated depreciation) and a fair value of
$7,700.
1) Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.
2) Prepare the journal entry to record the exchange assuming that the exchange lacks commercial
substance.
D) Denver Company traded an old machine with book value of $60,000 (cost $110,000 less accumulated
depreciation $50,000) and a fair value of $100,000. Denver received a machine with a fair value of
$80,000 plus cash of $20,000.
1) Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.
2) Prepare a journal entry, assuming no commercial substance.
II. Broncos Company purchased assets of Holmes Ltd. at auction for $1,300,000. An independent
appraisal of the fair value of the assets acquired is listed below:
Land $214,500
Building 357,500
Equipment 572,000
Inventories 286,000

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