Asset Exchanges Bahrain Corporation Follows a Policy of a 10% Depreciation Charge

question 46

Essay

Asset exchanges
Bahrain Corporation follows a policy of a 10% depreciation charge per year on machinery and a 5% depreciation charge per year on buildings.

The following transactions occurred in 2020:
March 31, 2020 A warehouse that Bahrain had purchased on January 1, 2011, for $ 1.7 million (with a current fair value of $ 1 million) was exchanged for another warehouse which also had a current fair value of $ 1 million. Depreciation has been properly charged from Jan. 1, 2011 through Dec. 31, 2019. Both parcels of land on which the warehouses were located were equal in value, and had a fair value equal to book value.
June 30, 2020 Machinery with a cost of $ 120,000 and accumulated depreciation through December 31, 2019, of $ 90,000 was exchanged, along with $ 75,000 cash, for a parcel of land with a fair market value of $ 115,000.
Instructions
Prepare all appropriate journal entries for Bahrain Corporation for the above dates.

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Definitions:

Domestic Commercial Contracts

Pertains to agreements made within a country’s borders that are related to the purchase, sale, or exchange of goods and services.

Legal Issues

Disputes or controversies that are submitted to a court for resolution involving questions of law or legal principles.

European Community

An economic and political union established by six European countries in 1957, which expanded and evolved into what is now the European Union (EU), aimed at fostering economic cooperation and integration among its members.

Predecessor

An entity or person who held a position or role before the current holder.