Recording Asset Exchanges Minneapolis Inc. has equipment with an original cost of $84,000 and accumulated depreciation of $48,000. This equipment was traded in for new equipment with a list price of $96,000. The new machine can be purchased without a trade-in for $90,000 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash. Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $60,000 cash is paid. c. The same as in part b except that the transaction lacks commercial substance.
Recording Asset Exchanges Minneapolis Inc. has equipment with an original cost of $84,000 and accumulated depreciation of $48,000. This equipment was traded in for new equipment with a list price of $96,000. The new machine can be purchased without a trade-in for $90,000 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash. Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $60,000 cash is paid. c. The same as in part b except that the transaction lacks commercial substance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Recording Asset Exchanges
Minneapolis Inc. has equipment with an original cost of $84,000 and
Prepare the entry to record acquisition of the new machine under each of the following separate cases.
a. The new machine is purchased for cash with no trade-in.
b. The transaction has commercial substance. The old equipment is traded in, and $60,000 cash is paid.
c. The same as in part b except that the transaction lacks commercial substance.
a.
| Account Name | Dr. | Cr. |
|---|---|---|
| Answer | Answer | Answer |
| Answer | Answer | Answer |
b.
| Account Name | Dr. | Cr. |
|---|---|---|
| Equipment (new) | Answer | Answer |
| Accumulated Depreciation | Answer | Answer |
| Answer | Answer | Answer |
| Answer | Answer | Answer |
| Equipment (old) | Answer | Answer |
b.
| Account Name | Dr. | Cr. |
|---|---|---|
| Equipment (new) | Answer | Answer |
| Accumulated Depreciation | Answer | Answer |
| Answer | Answer | Answer |
| Answer | Answer | Answer |
| Equipment (old) | Answer | Answer |
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