Current Attempt in Progress Splish Brothers Inc. purchased a commercial grade soft-serve ice cream machine on September 30, 2017. Splish Brothers traded in its existing machine and paid cash in the transaction. The details of the transaction are as follows: . . . List price of new freezer Cash paid Cost of old machine (4-year life, $1,320 salvage value) Accumulated depreciation-old machine (straight-line) Secondhand fair value of old machine Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Splish Brothers's fiscal year ends on December 31, and Splish Brothers recorded depreciation on the old machine through September 30, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually) No. Account Titles and Explanation (a) Exchange has commercial substance: $10,260 12,144 15,400 7,040 5,896 Depreciation Expense Accumulated Depreciation Machinery Debit Credit

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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.