Subject: Intermediate Accounting

During the current year, Grouper Construction Ltd. traded in two relatively new small cranes (cranes no. 6RT and S79) for a larger crane that Grouper expects will be more useful for the particular contracts that the company has to fulfill over the next couple of years. The new crane is acquired from Monty Manufacturing Inc., which has agreed to take the smaller equipment as trade-ins and also pay $19,000 cash to Grouper. The new crane cost Monty $160,500 to manufacture and is classified as inventory. The following information is available: Grouper Monty Cost of crane #6RT $124,000 Cost of crane #S79 114,000 Accumulated depreciation, #6RT 13,000 Accumulated depreciation, #S79 16,000 Fair value, #6RT 123,000 Fair value, #879 84,500 Fair value of new crane $188,500 Cash paid 19,000 Cash received 19,000 Assume that this exchange has commercial substance. Prepare the journal entries on the books of (1) Grouper Construction and (2) Monty Manufacturing. Monty uses a perpetual inventory system. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Grouper Construction Account Titles and Explanation Debit Credit Sales Revenue Equipment (Crane #879) Gain on sale of Equipment Accounts Payable Accumulated Depreciation - Equipment (Crane #6RT) No Entry Equipment (New) Loss on Disposal of Equipment Cost of Goods Sold Accounts Receivable Cash Accumulated Depreciation - Equipment (Crane #579) Equipment (Crane #6RT) Inventory Inventory (Used) Sales Revenue Monty Manufacturing Account Titles and Explanation Debit Credit Cash Equipment (New) Accumulated Depreciation - Equipment (Crane #6RT) Equipment (Crane #S79) Inventory Accounts Payable No Entry Accumulated Depreciation - Equipment (Crane #879) Loss on Disposal of Equipment Cost of Goods Sold Accounts Receivable Equipment (Crane #6RT) Sales Revenue Gain on sale of Equipment (To record cost of goods sold) Assume that this exchange lacks commercial substance. Prepare the journal entries on the books of (1) Grouper Construction and (2) Monty Manufacturing. Monty uses a perpetual inventory system. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Grouper Construction Account Titles and Explanation Debit Credit Gain on sale of Equipment No Entry Accumulated Depreciation - Equipment (Crane #879) Equipment (Crane #579) Accumulated Depreciation - Equipment (Crane #6RT) Equipment (New) Accounts Receivable Cash Sales Revenue Inventory Loss on Disposal of Equipment Equipment (Crane #6RT) Accounts Payable Cost of Goods Sold Monty Manufacturing Account Titles and Explanation Debit Credit No Entry Inventory Accounts Receivable Accumulated Depreciation - Equipment (Crane #6RT) Equipment (Crane #S79) Accounts Payable Cash Equipment (New) Gain on sale of Equipment Loss on Disposal of Equipment Equipment (Crane #6RT) Accumulated Depreciation - Equipment (Crane #S79) Cost of Goods Sold Sales Revenue