Assume that Rascals Candy, Inc. reports under IFRS. Repeat the requirements of E11- 29, part (c).
In E11- 29
On January 2, 2015, Temptations Corporation paid $ 31,500 in cash and exchanged a chocolate mixing machine, which had a fair value of $ 437,500 and a book value of $ 500,000 ($ 1,135,000 historical cost - $ 635,000 accumulated depreciation brought up to the date of the transaction) for another chocolate mixing machine from Rascals Candy, Inc. The new mixing machine had a fair value of $ 469,000 and a book value of $ 380,000 ($ 1,500,000 - $ 1,120,000).
Required
a. Record the journal entry on the books of the Temptations Corporation to record the exchange assuming the transaction altered the economic positions of the parties.
b. Assume that the fair value of the old machine is now estimated at $ 562,500 and that new mixing machine had been appraised at $ 594,000. In addition, the exchange will not materially change the economic positions of the parties to the transaction. Record the journal entry on the books of the Temptations Corporation to record the exchange of the machines. All other information remains the same as in part (a).
c. Repeat part (b) on the books of Rascals Candy, Inc.