Polar Sky Railway (PSR), a transportation company, has substantial investments in property, plant, and equipment. In 2020, the company exchanged some of these assets with other companies. [Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR is trying to expand its business in transportation beyond rail, so the company traded some railcars in return for several trucks. On PSR's books, the railcars had a cost of $12 million, accumulated depreciation of $9 million, and fair value of $6 million. The trucks had a fair value of $5.9 million and were recorded on the seller's books at a cost of $4 million and accumulated depreciation of $1 million. No cash was involved in this exchange.
Required:
Record the journal entry for the above transaction on PSR's books. State your reason(s)for the chosen accounting method.

Question

Quizplus · Accepted Answer

The Answer of Polar Sky Railway (PSR), a transportation company, has substantial investments in property, plant, and equipment. In 2020, the company exchanged some of these assets with other companies. [Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR is trying to expand its business in transportation beyond rail, so the company traded some railcars in return for several trucks. On PSR's books, the railcars had a cost of $12 million, accumulated depreciation of $9 million, and fair value of $6 million. The trucks had a fair value of $5.9 million and were recorded on the seller's books at a cost of $4 million and accumulated depreciation of $1 million. No cash was involved in this exchange.
Required:
Record the journal entry for the above transaction on PSR's books. State your reason(s)for the chosen accounting method.

Polar Sky Railway (PSR), a Transportation Company, Has Substantial Investments