Exchange of Assets
Youth Development Co. acquired the following assets in exchange for various nonmonetary assets.
2008
Mar. 15 Acquired from another company a large lathe in exchange for three small lathes. The small lathes had a total cost of $36,000 and a remaining book value of $13,000. The new lathe had a market value of $19,000, approximately the same value as the three small lathes. This transaction is deemed NOT to have commercial substance.
June 1 Acquired 250 acres of land by issuing 2,500 shares of common stock with par value of $1 and market value of $85. Market analysis reveals that the market value of the stock was a reasonable value for the land.
July 15 Acquired a used piece of heavy, earth moving equipment, market value, $105,000, by exchanging a used molding machine with a market value of $30,000 (book value, $6,000; cost, $42,000) and land with a market value of $95,000 (cost, $50,000). Cash of $20,000 was received by Youth Development Co. as part of the transaction.
Aug. 15 Acquired a patent, franchise, and copyright for two used milling machines. The book value of each milling machine was $3,500, and each originally cost $12,000. The market value of each machine is $15,000. It is estimated that the patent and franchise have about the same market values, and the market value of the copyright is 50% of the market value of the patent.
Nov. 1 Acquired a new packaging machine for four old packaging machines. The old machines had a total cost of $60,000 and a total remaining book value of $15,000. The new packaging machine has an indicated market value of $40,000, approximately the same value as the four machines. This transaction is deemed to have commercial substance.
Instructions: Prepare the journal entries required on Youth Development Co.’s books to record the exchanges.