Flint Company purchased an electric press on June 30, 2017, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase. List price of new press Cash paid Cost of old press (10-year life, $1,000 residual value) Accumulated depreciation-old press (straight-line) Secondhand market value of old press $24,700 13,100 33,700 26,700 6,200 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Flint's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Flint Company purchased an electric press on June 30, 2017, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase. List price of new press Cash paid Cost of old press (10-year life, $1,000 residual value) Accumulated depreciation-old press (straight-line) Secondhand market value of old press $24,700 13,100 33,700 26,700 6,200 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Flint's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles
Section: Chapter Questions
Problem 8.6E
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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.
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