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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.

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 75APSA
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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.

 

 

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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