Ward Company purchased an electric press on June 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase: List price of new press $24,800 Cash paid 12,000 Cost of old press (10-year life, $1,000 residual value): 35,000                          Accumulated depreciation—old press (straight-line): 27,200 Second-hand market value of old press 6,600 Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Ward’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019.

Question

Ward Company purchased an electric press on June 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase:

List price of new press $24,800

Cash paid 12,000

Cost of old press (10-year life, $1,000 residual value): 35,000                         

Accumulated depreciation—old press (straight-line): 27,200

Second-hand market value of old press 6,600

Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Ward’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019.

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