Instructions: Martin's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019. 1. Prepare the journal entries to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. 2. Assume that instead of the 1,000 cash paid, Martin Inc. paid 10,000 cash in this transaction. Prepare the journal entries to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance.
Part 2. Martin Inc. purchased a new truck on April 30, 2020, by trading in its old model and paying the balance in cash. The following data relate to the transaction:
List price of new truck
$6,800
Cash paid
1,000
Cost of old truck (5-year life, $700 salvage value)
11,200
6,300 Fair value of old truck
5,200
Instructions:
Martin's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019.
1. Prepare the
2. Assume that instead of the 1,000 cash paid, Martin Inc. paid 10,000 cash in this transaction. Prepare the journal entries to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance.
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