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Prepare the journal entry to record the exchange

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Question - Durler Company purchased equipment on January 2, 2016, for $112,000. The equipment had an estimated useful life of 5 years with an estimated salvage value of $12,000. Durler uses straight-line depreciation on all assets. On January 2, 2020, Durler exchanged this equipment plus $12,000 in cash for newer equipment. The old equipment has a fair value of $50,000.

ACCOUNTING - Prepare the journal entry to record the exchange on the books of Durler Company. Assume that the exchange has commercial substance.

ANALYSIS - How will this exchange affect comparisons of the return on asset ratio for Durler in the year of the exchange compared to prior years?

PRINCIPLES - How does the concept of commercial substance affect the accounting and analysis of this exchange?

Reference no: EM133087648

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