Solution-Journal entries necessary to record exchange

Journal entries necessary to record exchange

Reference no: EM13973120

Cannondale Company purchased an electric wax melter on April 30, 2014, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.

List price of new melter		$26,544
Cash paid		16,800
Cost of old melter (5-year life, $1,176 salvage value)		18,816
Accumulated Depreciation-old melter (straight-line)		10,584
Secondhand fair value of old melter		8,736

Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cannondale's year ends on December 31, and depreciation has been recorded through December 31, 2013

No.	Account Titles and Explanation	Debit	Credit
(a)	Exchange has commercial substance:
	Depreciation Expense	1176
	Accumulated Depreciation-Equipment		1176
	(To record current depreciation.)
	Equipment	25536
	Accumulated Depreciation-Equipment	11760
	Cash		16800
	Equipment		18816
	Gain on Disposal of Equipment		1680
	(To record exchange of the machine.)
(b)	Exchange lacks commercial substance:
	Depreciation Expense	1176
	Accumulated Depreciation-Equipment		1176
	(To record current depreciation.)
	Equipment	??
	Accumulated Depreciation-Equipment	11760
	Gain on Disposal of Equipment		??
	Equipment		18816
	Cash		16800
	(To record exchange of the machine.)

Reference no: EM13973120

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Journal entries necessary to record exchange

Reference no: EM13973120

Reference no: EM13973120

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