Exchange of fixed assets: It refers to the purchase of new fixed assets in exchange of old fixed assets. C ommercial substance: It means that the exchange of the fixed asset cause changes in the future cash flows as more revenue will generate from the new fixed asset due to an increase in its productivity. Thus, if the revenue earned or expenses incurred changes in the future due to the exchange of fixed assets, then it will be referred as the exchange has a commercial substance. To journalize: the current depreciation of the old equipment to the date of trade-in.

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Chapter 9, Problem 9.25EX

(A)

To determine

Exchange of fixed assets: It refers to the purchase of new fixed assets in exchange of old fixed assets.

Commercial substance: It means that the exchange of the fixed asset cause changes in the future cash flows as more revenue will generate from the new fixed asset due to an increase in its productivity. Thus, if the revenue earned or expenses incurred changes in the future due to the exchange of fixed assets, then it will be referred as the exchange has a commercial substance.

To journalize: the current depreciation of the old equipment to the date of trade-in.

(B)

To determine

To journalize: the exchange transaction on July 1.

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Entries for Trade of Fixed Asset 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. Assume the exchange has commercial substance. a. Journalize the entry to record the current depreciation of the old equipment to the date of trade-in. If an amount box does not require an entry, leave it blank. b. Journalize the entry to record the exchange transaction on July 1. If an amount box does not require an entry, leave it blank.

On January 2, Bering Company disposes of a machine costing $53,000 with accumulated depreciation of $28,551. Prepare the entries co record the disposal under each separate situation. 1. The machine is sold for $20,505 cash. 2. The machine is traded in for a new machine having a $69,500 cash price, A $25,237 trade-in allowance is received, and the balance is paid in cash. Assume the asset exchange has commercial substance 3. The machine is traded in for a new machine having a $69,500 cash price. A $18,928 trade in allowance is received, and the balance is paid in cash. Assume the asset exchange has commercial substance Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 The machine is sold for $20,505 cash. View transaction list Journal entry worksheet

Subject: acounting