Problem NO: 8

Holyfield Corporation wishes to exchange a machine used in its operations.\nHolyfield has received the following offers from other companies in the ind

Holyfield Corporation wishes to exchange a machine used in its operations.

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Holyfield has received the following offers from other companies in the industry.

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1. Dorsett Company offered to exchange a similar machine plus $23,000. (The exchange has commercial substance for both parties.)

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2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)

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3. Liston Company offered to exchange a similar machine, but wanted $3,000 in addition to Holyfield’s machine. (The exchange has commercial substance for both parties.)

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In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine,

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Holyfield must pay $93,000 in addition to trading in its old machine.

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Date Amount

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July 30, 2014 $ 900,000

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January 30, 2015 1,500,000

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May 30, 2015 1,600,000

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Total payments $4,000,000

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Holyfield Dorsett Winston Liston Greeley

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Machine cost $160,000 $120,000 $152,000 $160,000 $130,000

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Accumulated depreciation 60,000 45,000 71,000 75,000 –0–

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Fair value 92,000 69,000 92,000 95,000 185,000

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Instructions

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For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

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