During the current year, Marshall Construction trades an old crane that has a book value of $90,000 (original cost $140,000 less accumulated depreciation $50,000) for a new crane from Brigham Manufacturing Co. The new crane cost Brigham $165,000 to manufacture and is classified as inventory. The following information is also available. Marshall Const. Brigham Mfg. Co.
Fair value of old crane $82,000
Fair value of new crane $200,000
Cash paid 118,000
Cash received 118,000

Required:
Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Marshall Construction and (2) Brigham Manufacturing.

Journal Entries:

Marshall Construction:

Debit Disposal of Crane $140,000

Credit Credit Equipment $140,000

To transfer the cost of the old crane to disposal of crane account.

Debit Accumulated Depreciation $50,000

Credit Disposal of Crane $50,000

To transfer the accumulated depreciation to the disposal of crane account.

Debit Equipment $200,000

Credit Cash $118,000

Credit Disposal of Crane $82,000

To record the cost of the new crane, including the cash payment and exchange value of old crane.

Debit Loss on Disposal of Crane $8,000

Credit Disposal of Crane $8,000

To close the disposal of crane account with the recorded loss on disposal.

Brigham Manufacturing Co.

Debit Cash $118,0000

Debit Inventory $82,000

Credit Sales Revenue $200,000

To record the sale of goods for cash and exchange value.

Debit Cost of goods sold $165,000

Credit Inventory $165,000

To record the cost of goods sold.

Explanation:

a) Data and Calculations:

                                    Marshall Const.   Brigham Mfg. Co.

Fair value of old crane       $82,000

Fair value of new crane                            $200,000

Cash paid                            118,000

Cash received                                              118,000

Fair value of old crane                                 82,000

Total value exchanged $200,000         $200,000

Data and Analysis:

Marshall Construction:

Disposal of Crane $140,000 Credit Equipment $140,000

Accumulated Depreciation $50,000 Disposal of Crane $50,000

Equipment $200,000 Cash $118,000 Disposal of Crane $82,000

Loss on Disposal of Crane $8,000 Disposal of Crane $8,000

Brigham Manufacturing Co.

Cash $118,0000 Inventory $82,000 Sales Revenue $200,000

Cost of goods sold $165,000 Inventory $165,000

c

explanation:

answer; schedule c;