You have two clients in the construction industry that are considering exchanging machinery with each other. Ames Construction has decided to market its services to clients who need major construction projects, but it has a significant inventory of equipment that is more appropriate for smaller home renovations. Jung Corp.'s strategic plan, on the other hand, has recently changed to focus on home renovations, additions, and repairs. Jung would like to sell off the equipment it used in constructing larger apartment buildings and condominiun1s over the past few years and acquire equipment that is more suitable for its new strategy. A deal has been reached between the owner-managers of both companies to exchange a group of machinery and equipment. The fair values determined for the equipment are reliable in both cases. The details of the transaction are as follows:
Write a memo to the accountants of both Ames Construction and Jung Corp. with your recommendation on how this transaction should be recorded on the books of each company. If there are any choices available to them, identify what they are. Be sure to explain the rationale for your recommended treatment.

  • CreatedSeptember 18, 2015
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