On January 1, 2016, Cougar Company purchased a piece of machinery and signed a zero-interest-bearingnote in payment. The note requires Cougar to pay 100,000 in three years. The interest rate that properlyreflected the time value of money at the time was 5% and an equipment dealer in St. Louis sells theidentical piece of machinery for $86,000. Cougar expected the machinery to have an 8 year useful life,and $6,000 salvage value. Cougar depreciated the machine using the straight-line method. On June 30,2018, Cougar exchanged the machinery for a newer model. In addition to the old equipment, Cougar paid$10,000 cash. At the time of the exchange, the old machinery had a fair value of $70,000. Prepare thejournal entry to record this exchange, assuming the arrangement has commercial substance.Prepare the journal entry to record the exchange, assuming the arrangement lacks commercial substance.ICHY-

Given: Cougar to pay 100,000 identical piece of machinery $86,000 Cougar paid=$10,000 fair…

Answered: requires alue of money at machinery for…

Business

Accounting

requires alue of money at machinery for $86- value. Cougar d anged the machin

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Cash Book

So, before coming to the topic of cash books, I will let you briefly explain about the cash so that you all can be familiar with the word cash. Cash comes under the category of the current asset which is used as a medium of exchange for all the financial transactions in the firm. Cash is something that is universally accepted as a mode of payment. So, now comes to the topic i.e., cash book.

Question

On January 1, 2016, Cougar Company purchased a piece of machinery and signed a zero-interest-bearing
note in payment. The note requires Cougar to pay 100,000 in three years. The interest rate that properly
reflected the time value of money at the time was 5% and an equipment dealer in St. Louis sells the
identical piece of machinery for $86,000. Cougar expected the machinery to have an 8 year useful life,
and $6,000 salvage value. Cougar depreciated the machine using the straight-line method. On June 30,
2018, Cougar exchanged the machinery for a newer model. In addition to the old equipment, Cougar paid
$10,000 cash. At the time of the exchange, the old machinery had a fair value of $70,000. Prepare the
journal entry to record this exchange, assuming the arrangement has commercial substance.
Prepare the journal entry to record the exchange, assuming the arrangement lacks commercial substance.
ICHY-

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Accounting for Cash and cash equivalents

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