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Make all entries that are necessary on April

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Question - Vaughn Co. had a sheet metal cutter that cost $108,000 on January 5, 2016. This old cutter had an estimated life of ten years and a salvage value of $16,000. On April 3, 2021, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Vaughn also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2020, and that straight-line depreciation is used.

Required -

1. Calculate the gain or loss to be recognized by Vaughn Co.

2. Make all entries that are necessary on April 3, 2021.

Reference no: EM132635217

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