[MrsBing]

If I’m transferring an asset from one related company to another (no cash exchanged), what would the journal entry look like on both books with the following information?

Asset original cost = 160

Asset accumulated depreciation = 160

NBV = 0

FV = 40

GAAP says that non-reciprocal transfers must be recorded at fair value for the the transferor and transferee.

This is the entry I got for the transferee:

Asset (debit) 40

Gain (credit) 40

This is the partial entry I got for the transferor:

Asset (debit) 160

Loss (debit ) 40

Accum Depreciation (credit) 160

? (credit) 40

Are these entries correct and what would be the account for the question mark if that entry is even correct or not?

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[kc10e]

The transferor wouldn't debit the asset, they would credit it.

F- 84 (1st try) studied 3.5 months
A- 96 (1st try) 5 weeks
R-
B-
Becker self study and lots of caffeine

[MrsBing]

This is what I got for the transferor. Does this look right?

Accum Depreciation (debit) 160

Expense (debit ) 40

Asset (credit) 160

Intercompany Gain (credit) 40

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[kc10e]

That doesn't look right. The transferor wouldn't expense a deprciable asset. Far has been a while for me, but wouldn't the transferor just unload it from its books:

Dr AD 160

Cr asset 160

Then the transferee would record the asset at FMV per GAAP and recognize an intercompany gain that would be subsequently eliminated during consolidation?

ie…

Dr asset 40

Cr gain 40

F- 84 (1st try) studied 3.5 months
A- 96 (1st try) 5 weeks
R-
B-
Becker self study and lots of caffeine

[kc10e]

Btw it's kind of weird because non monetary exchange rules wouldn't apply because its intercompany and from the fact pattern you gave doesent call for any consideration from the transferee….

F- 84 (1st try) studied 3.5 months
A- 96 (1st try) 5 weeks
R-
B-
Becker self study and lots of caffeine

[MrsBing]

That's what has me confused. If the transferor writes off the asset with a debit to AD and a credit to the asset. Then the transferee records the asset at fair value with an intercompany gain what would the intercompany gain be eliminated against?

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[k1zuna]

where is this question coming from? wiley, becker? I THOUGHT I WAS DONE WITH JOURNAL ENTRIES ONCE I TOOK FAR! lol

FAR - Passed
AUD - Passed
BEC - Passed
REG - 8/22/2013

[MrsBing]

It's a work related issue. We're transferring a fully depreciated fixed asset from the sub to the parent. We're not giving the sub anything in return. I couldn't find anything in the codification. I found something in the NonMonetary section for Non-Reciprocial transfers saying to transfer at fair value, but in the Scope section it says anything relating to the nonmonetary transactions section doesn't apply to intercompany transactions. So, I'm still not sure what's the correct way this is suppose to be recorded.

We decided that we're going to record the entry at the NBV so that we don't have to do any elimination entries at consolidation.

Transferor:

AD(debit) 160

Asset (credit) 160

Transferee:

Asset (debit) 160

AD (credit) 160

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[Author]

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