Prepare the entries to update the depreciation

Nelson Enterprises exchanged a building it owned in Grand Junction for a building in Canon City owned by Lamb Corporation. The buildings were both valued at $575,000, so there was no cash transferred between the companies. Just prior to the exchange, Nelson’s accounts showed the cost of the original building as $425,000, with accumulated depreciation of $260,000. Lamb’s Canon City building was on its books with a cost of $750,000 and accumulated depreciation of $160,000. Determine the gain or loss that each company should recognize.

What dollar amount should each company assign to the building it acquired?

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If the exchange lacked economic substance, how would it be recorded?

McKain, Inc., closes its books on October 31 and prepares depreciation adjustments annually. On July 27, 2010, McKain sold some equipment with an original cost of $36,250 for $18,500. The equipment was purchased on November 4, 2005, and was depreciated using the straight-line method and had an estimated useful life of eight years and a salvage value of $1,650.

Prepare the entries to update the depreciation and record the sale of the equipment.

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