Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 10, Problem 27E
(a)
To determine
Journalize the current depreciation of the old equipment to the date of trade-in.
(b)
To determine
Journalize the exchange transaction on July 1.
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On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $75,000. Bentley Delivery received a trade-in allowance (fair market value) of $24,000 on an old truck of similar type and paid cash of $51,000. The following information about the old truck is obtained from the account in the equipment ledger: cost, $56,000;accumulated depreciation on December 31, the end of the preceding fiscal year, $35,000; annual depreciation, $7,000. Assuming that the exchange has commercial substance, journalize the entries to record (a) the current depreciation of the old truck to the date of trade-in and (b) the transaction on October 1.
On July 1, Twin Pines Co., a water distiller, acquired new bottling equipment with a list price (fair market value) of $220,000. Twin Pines received a trade-in allowance (fair market value) of $45,000 on the old equipment of a similar type and paid cash of $175,000. The following information about the old equipment is obtained from the account in the equipment ledger: cost, $180,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $120,000; annual depreciation, $12,000.Assuming that the exchange has commercial substance, journalize the entries to record (a) the current depreciation of the old equipment to the date of trade-in and (b) the exchange transaction on July 1.
On October 1, Hot Springs Co., a water distiller, acquired new bottling equipment with a list price (fair market value) of $462,000. Hot Springs received a trade-in allowance of $96,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000 accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000.
Assuming the exchange has commercial substance, journalize the entries to record:
(a) the current depreciation of the old equipment to the date of trade-in and
(b) the exchange transaction on October 1.
Chapter 10 Solutions
Financial Accounting
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