[rithzz]

Hello,

Could someone please give me the journal entry for this question?

On July 1, Year 1, Balt Co. exchanged a truck for 25 shares of Ace Corp.’s common stock. On that date, the truck’s carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Ace’s stock was $60 per share. On December 31, Year 1, Ace had 250 shares of common stock outstanding and its book value per share was $50. What amount should Balt report in its December 31, Year 1 balance sheet as investment in Ace assuming the transaction had commercial substance?

I know the answer is 3000, I would just like to know what the whole JE would be.

AUD: 78
BEC: 81
FAR: 73, 85
Reg: 84

[Steve Brule]

Investment 3,000
Asset 2,500
Gain 500

To break it down a little, the exchange is fair value for fair value since it's with commercial substance. We know the fair value of the truck is 3,000, so we assume that's also the fair value of the shares received. We know the carrying value of the truck given up is 2,500, and we show a gain of 500 as a plug figure in the journal entry.

FAR - 86
AUD - 99
REG - 88
BEC - 08/29/2016

For your health!

[Steve Brule]

DR Investment 3,000
CR Asset 2,500
CR Gain 500

FAR - 86
AUD - 99
REG - 88
BEC - 08/29/2016

For your health!

[Author]

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