Coronado Company purchased an electric wax melter on April 30, 2025, by tradi The following data relate to the purchase. List price of new melter Cash paid Cost of old melter (5-year life, $1,000 salvage value) Accumulated depreciation-old melter (straight-line) Secondhand fair value of old melter $19,600 12,400 13,900 7,800 6,400
Coronado Company purchased an electric wax melter on April 30, 2025, by tradi The following data relate to the purchase. List price of new melter Cash paid Cost of old melter (5-year life, $1,000 salvage value) Accumulated depreciation-old melter (straight-line) Secondhand fair value of old melter $19,600 12,400 13,900 7,800 6,400
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Topic Video
Question
Do not give image format
Transcribed Image Text:Coronado Company purchased an electric wax melter on April 30, 2025, 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
Cash paid
Cost of old melter (5-year life, $1,000 salvage value)
Accumulated depreciation-old melter (straight-line)
Secondhand fair value of old melter
$19,600
12,400
EMRA
13,900
7,800
6,400
Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks
commercial substance. Coronado's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2024.
(Credit account titles are automatically indented when amount entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Transcribed Image Text:No. Account Titles and Explanation
(a) Exchange has commercial substance:
Depreciation Expense
Accumulated Depreciation - Equipment
(To record current depreciation.)
Equipment
Accumulated Depreciation Equipment
Gain on Disposal of Equipment
Cash
Equipment
(To record exchange of the equipment.)
Show Transcribed Text
(b) Exchange lacks commercial substance:
Depreciation Expense
Accumulated Depreciation Equipment
(To record current depreciation.)
Equipment
Accumulated Depreciation -Equipment
Gain on Disposal of Equipment
Cash
Equipment.
(To record exchange of the equipment.)
3
Debit
4,300
KAROO
18,800
12,100
4,300
LOOOO
18,800
12,100
Credit
4,300
4,600
12,400
13,900
4,300
4,600
12,400
13,900
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education