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Prepare the necessary journal entry to record this exchange

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Reference no: EM132723132

Problem - Stillman Company purchased a new machine at the start of its current year at a cost of $37,500. The machine is expected to serve for five years and to have a salvage value of $3,000. Ronald L. Stillman, the chief executive officer, has asked for information as to the effects of alternative depreciation methods.

Assume that Stillman chose the double-declining-balance method of depreciation for this machine. Then, in the first week of year 5, the machine was exchanged (traded in) for similar equipment costing $45,000. The market value and trade-in allowance on the old machine was $4,000 and cash was paid for the balance. Prepare the necessary journal entry to record this exchange.

Reference no: EM132723132

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