On August 1, Silver Company exchanged a machine for a similar machine owned by Wrangler Company and also received $7, 000 cash from Wrangler Company.Silver's machine had an original cost of $70, 000, accumulated depreciation to date of $34, 500, and a fair market value of $60, 000.Wrangler's machine had a book value of $45, 000 and a fair value of $53, 000.
Required:
Prepare the necessary journal entry by Silver Company to record this transaction assuming
a. Siver will use the newly acquired machine in the same manner as the old one.
b. Silver's use of the new machine will be substantially different from the old one.

Question

Vanessa Crawford · Accepted Answer

Final Answer :  a.  Cash  7 , 000  Equipment  ( $ 35 , 500 − $ 7 , 000 ) 28 , 500  Accumulated Depreciation-Equipment  34 , 500 70 , 000 \begin{array}{lll}	ext { Cash }  &  7,000  &  \	ext { Equipment }(\$ 35,500-\$ 7,000)  &  28,500  &  \	ext { Accumulated Depreciation-Equipment }  &  34,500 \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad &  70,000\end{array}  Cash   Equipment  ( $35 , 500 − $7 , 000 )  Accumulated Depreciation-Equipment  ​ 7 , 000 28 , 500 34 , 500 ​ 70 , 000 ​ b.  Cash  7 , 000  Equipment  ( $ 60 , 000 − $ 7 , 000 ) 53 , 000  Accumulated Depreciation-Equipment  34 , 500  Equipment  70 , 000  Gain  [ $ 60 , 000 − ( $ 70 , 000 − $ 34 , 500 ) ] 24 , 500 \begin{array}{lll}	ext { Cash }  &  7,000  &  \	ext { Equipment }(\$ 60,000-\$ 7,000)  &  53,000  &  \	ext { Accumulated Depreciation-Equipment }  &  34,500  \ &  	ext { Equipment }  &  70,000\ & 	ext { Gain }[\$ 60,000-(\$ 70,000-\$ 34,500)] & 24,500\end{array}  Cash   Equipment  ( $60 , 000 − $7 , 000 )  Accumulated Depreciation-Equipment  ​ 7 , 000 53 , 000 34 , 500  Equipment   Gain  [ $60 , 000 − ( $70 , 000 − $34 , 500 )] ​ 70 , 000 24 , 500 ​

Definitions

Learning Objectives

Learning Objectives

Related questions