E10-9 Asset Acquired by Donation On March 1, a developer of a large shopping center donated a building and 1O 10.2 land to Hertting Co. withourt charge. The agreement provided that the company employ 350 people for 10 vears. The land was appraised at $65,000 and the building at $44.,000. . Prepare the journal entry to record the acquisition of the land and building. 2. Next Level How should the 10-year agreement be reported in the financial statements? 3. Next Level If the title were not to pass until after 10 years, would your answers to Requirements 1 and 2 change? E10-10 Exchange of Assets Two independent companies, Denver and Bristol, cach own a warehouse. On LO 10.3 January 1, they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available: Denver Bristol Show Cost $90,000 $45,000 Me How Accumulated depreciation 55,000 25,000 Fair value 30,000 30,000 Required 1. Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange. 2. Assuming the exchange does not have commercial substance, prepare journal entries for Denver and Bristol to record the exchange. 3. Next Level What is the justification of accounting for the exchange differently when the exchange has commercial substance versus when it does not?E10-21 Capital and Operating Expenditures Huxley Company incurs the following expenditures, which may LO 10.5 be capital expenditures or operating expenditures: a. cost of installing machinery b. cost of moving machinery . repairs as a result of an accident d. cost of major overhaul . installation of safety device required as a result of OSHA inspection f. property taxes on land and buildings g. replacement of the roof on a factory building thar extended the life of the building h. cost of rearranging offices expected to increase operational efficiency i. cost of annual repainting of offices J. ordinary repairs How would Huxley record cach of the expenditures? P10-5 Assets Acquired by Exchange Bremer Company made the following exchanges of assets during the year: LO 10.3 1. Acquired a more advanced machine worth $10,000 by paying $2,000 cash and giving up a machine that had originally cost $40,000 and has a book value of $12,000. 2. Acquired a building worth $55,000 by paying $5,000 cash and giving up a piece of land that had originally cost $35,000. 3. Acquired a more advanced machine worth $20,000 by paying $5,000 cash and giving up a machine that had originally cost $13,000 and has a book value of $11,000. 4. Acquired a car by giving up a truck that had originally cost $20,000, has a book value of $15,000, and has a "blue book" value of $16,800. In addition, the company received $1,000 cash. Required: Prepare Bremer's journal entry for each exchange. Assume all exchanges were determined to have com- mercial substance.P10-6 Assets Acquired by Exchange Bussell Company exchanged the following assets during the year: LO 10.3 a. Acquired a newer machine by paying $4,000 cash and giving up a machine that originally cost $40,000, has a book value of $25,000, and is worth $30,000. b. Same facts as in Item a, except that the asset being surrendered has a book value of $33,000. c. Acquired a newer machine by giving up a machine that originally cost $45,000, has a book value of $20,000, and is worth $32,000. In addition, $5,000 cash was received. d. Same facts as in Item c, except that the asset being surrendered has a book value of $36,000. c. Acquired a newer machine worth $90,000 by giving up a machine of equal value. The machine sur- rendered had originally cost $150,000 and has a book value of $80,000. f. Same facts as in Item e, except that the asset being surrendered has a book value of $94,000. g. Acquired a building in exchange for land that had originally cost $130,000 and is now worth $200,000. h. Same facts as in Item g, except that $30,000 was paid. i. Same facts as in Item g, except that $20,000 was received. Required: 1. Prepare Bussell's journal entry to record each acquisition. Assume all exchanges were determined to have commercial substance. 2. Consider Item e. Assuming the exchange does not have commercial substance, prepare journal entries to record the exchange. 3. Next Level What is the justification of accounting for the exchange differently when the exchange has commercial substance versus when it does not