Metlock Inc. purchased a commercial grade soft-serve ice cream machine on September 30, 2017. Metlock traded in its existing machine and paid cash in the transaction. The details of the transaction are as follows: ● List price of new freezer $16,600 ● Cash paid 11,040 ● Cost of old machine (4-year life, $1,200 salvage value) 14,000 ● Accumulated depreciation—old machine (straight-line) 6,400 ● Secondhand fair value of old machine 5,360 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Metlock’s fiscal year ends on December 31, and Metlock 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 Debit Credit (a) Exchange has commercial substance: enter an account title To record current depreciation enter a debit amount enter a credit amount enter an account title To record current depreciation enter a debit amount enter a credit amount (To record current depreciation) enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount (To record exchange of the machine) (b) Exchange lacks commercial substance: enter an account title To record current depreciation enter a debit amount enter a credit amount enter an account title To record current depreciation enter a debit amount enter a credit amount (To record current depreciation) enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount (To record exchange of the machine)

Metlock Inc. purchased a commercial grade soft-serve ice cream machine on September 30, 2017. Metlock traded in its existing machine and paid cash in the transaction. The details of the transaction are as follows: ● List price of new freezer $16,600 ● Cash paid 11,040 ● Cost of old machine (4-year life, $1,200 salvage value) 14,000 ● Accumulated depreciation—old machine (straight-line) 6,400 ● Secondhand fair value of old machine 5,360 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Metlock’s fiscal year ends on December 31, and Metlock 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 Debit Credit (a) Exchange has commercial substance: enter an account title To record current depreciation enter a debit amount enter a credit amount enter an account title To record current depreciation enter a debit amount enter a credit amount (To record current depreciation) enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount (To record exchange of the machine) (b) Exchange lacks commercial substance: enter an account title To record current depreciation enter a debit amount enter a credit amount enter an account title To record current depreciation enter a debit amount enter a credit amount (To record current depreciation) enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount enter an account title To record exchange of the machine enter a debit amount enter a credit amount (To record exchange of the machine)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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●	List price of new freezer	$16,600
●	Cash paid	11,040
●	Cost of old machine (4-year life, $1,200 salvage value)	14,000
●	Accumulated depreciation—old machine (straight-line)	6,400
●	Secondhand fair value of old machine	5,360

Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance.

Metlock’s fiscal year ends on December 31, and Metlock 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	Debit	Credit
(a)	Exchange has commercial substance:
	enter an account title To record current depreciation	enter a debit amount	enter a credit amount
	enter an account title To record current depreciation	enter a debit amount	enter a credit amount
	(To record current depreciation)
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	(To record exchange of the machine)
(b)	Exchange lacks commercial substance:
	enter an account title To record current depreciation	enter a debit amount	enter a credit amount
	enter an account title To record current depreciation	enter a debit amount	enter a credit amount
	(To record current depreciation)
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	enter an account title To record exchange of the machine	enter a debit amount	enter a credit amount
	(To record exchange of the machine)

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