Q1/C/Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook Inc. paid $8,000 cash and traded in used equipment. The used equipment had originally cost $62,000; it had a book value of $42,000 and a secondhand fair value of $47,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100. Instructions (a) Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance. (b) Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable, prepare the general journal entry to record this transaction

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Q1/C/Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic
equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook Inc. paid $8,000
cash and traded in used equipment. The used equipment had originally cost $62,000; it had
a book value of $42,000 and a secondhand fair value of $47,800, as indicated by recent
transactions involving similar equipment. Freight and installation charges for the new
equipment required a cash payment of $1,100.
Instructions
(a) Prepare the general journal entry to record this transaction, assuming that the exchange
has commercial substance.
(b) Assuming the same facts as in (a) except that fair value information for the assets
exchanged is not determinable, prepare the general journal entry to record this transaction
Transcribed Image Text:Q1/C/Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook Inc. paid $8,000 cash and traded in used equipment. The used equipment had originally cost $62,000; it had a book value of $42,000 and a secondhand fair value of $47,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100. Instructions (a) Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance. (b) Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable, prepare the general journal entry to record this transaction
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