FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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**Windsor Company Electric Wax Melter Purchase and Exchange Recording**

On April 30, 2025, Windsor Company purchased an electric wax melter by trading in its old gas model and paying the remaining balance in cash. Below are the relevant details of the purchase:

- **List price of new melter:** $18,300
- **Cash paid:** $11,600
- **Cost of old melter:** $13,000 (5-year life, $700 salvage value)
- **Accumulated depreciation—old melter (straight-line):** $7,300
- **Secondhand fair value of old melter:** $6,000

**Objective:** Prepare the journal entries necessary to record this exchange, considering both scenarios: (a) the exchange has commercial substance, and (b) the exchange lacks commercial substance. Windsor's fiscal year ends on December 31, with the provided depreciation recorded through December 31, 2024.

**Instructions:** List all debit entries before credit entries. If no entry is needed, select "No Entry" and enter 0 for amounts.

### (a) Exchange has commercial substance:

- **Account Titles and Explanation:**
  - Debit and Credit sections with multiple lines for entries
  - A note for recording current depreciation
  - A separate section to record the exchange of equipment

### (b) Exchange lacks commercial substance:

- **Account Titles and Explanation:**
  - Similar to part (a), providing spaces for entries
  - A note for recording current depreciation
  - Another section to record the exchange of equipment

No diagrams or graphs are included within this text. The focus is on tabulating and analyzing financial journal entries for accounting purposes.
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Transcribed Image Text:**Windsor Company Electric Wax Melter Purchase and Exchange Recording** On April 30, 2025, Windsor Company purchased an electric wax melter by trading in its old gas model and paying the remaining balance in cash. Below are the relevant details of the purchase: - **List price of new melter:** $18,300 - **Cash paid:** $11,600 - **Cost of old melter:** $13,000 (5-year life, $700 salvage value) - **Accumulated depreciation—old melter (straight-line):** $7,300 - **Secondhand fair value of old melter:** $6,000 **Objective:** Prepare the journal entries necessary to record this exchange, considering both scenarios: (a) the exchange has commercial substance, and (b) the exchange lacks commercial substance. Windsor's fiscal year ends on December 31, with the provided depreciation recorded through December 31, 2024. **Instructions:** List all debit entries before credit entries. If no entry is needed, select "No Entry" and enter 0 for amounts. ### (a) Exchange has commercial substance: - **Account Titles and Explanation:** - Debit and Credit sections with multiple lines for entries - A note for recording current depreciation - A separate section to record the exchange of equipment ### (b) Exchange lacks commercial substance: - **Account Titles and Explanation:** - Similar to part (a), providing spaces for entries - A note for recording current depreciation - Another section to record the exchange of equipment No diagrams or graphs are included within this text. The focus is on tabulating and analyzing financial journal entries for accounting purposes.
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