Asked by Anamari Kolak on May 26, 2024
Verified
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.
Accumulated Depreciation
The total amount of depreciation expense that has been recorded for an asset since it was put into use.
Book Value
The value of an asset as it appears on the balance sheet, calculated by subtracting the accumulated depreciation or amortization from its original cost.
- Comprehend the concepts related to documenting transactions with nonmonetary assets.
- Register the upgrade and acquisition of property, plant, and equipment in financial journals.
Verified Answer
VC
Vanessa CrawfordMay 26, 2024
Final Answer :
a.
Cash 7,000 Equipment ($35,500−$7,000)28,500 Accumulated Depreciation-Equipment 34,50070,000\begin{array}{lll}\text { Cash } & 7,000 & \\\text { Equipment }(\$ 35,500-\$ 7,000) & 28,500 & \\\text { 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 7,00028,50034,50070,000
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}\text { Cash } & 7,000 & \\\text { Equipment }(\$ 60,000-\$ 7,000) & 53,000 & \\\text { Accumulated Depreciation-Equipment } & 34,500 \\& \text { Equipment } & 70,000\\&\text { Gain }[\$ 60,000-(\$ 70,000-\$ 34,500)]&24,500\end{array} Cash Equipment ($60,000−$7,000) Accumulated Depreciation-Equipment 7,00053,00034,500 Equipment Gain [$60,000−($70,000−$34,500)]70,00024,500
Cash 7,000 Equipment ($35,500−$7,000)28,500 Accumulated Depreciation-Equipment 34,50070,000\begin{array}{lll}\text { Cash } & 7,000 & \\\text { Equipment }(\$ 35,500-\$ 7,000) & 28,500 & \\\text { 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 7,00028,50034,50070,000
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}\text { Cash } & 7,000 & \\\text { Equipment }(\$ 60,000-\$ 7,000) & 53,000 & \\\text { Accumulated Depreciation-Equipment } & 34,500 \\& \text { Equipment } & 70,000\\&\text { Gain }[\$ 60,000-(\$ 70,000-\$ 34,500)]&24,500\end{array} Cash Equipment ($60,000−$7,000) Accumulated Depreciation-Equipment 7,00053,00034,500 Equipment Gain [$60,000−($70,000−$34,500)]70,00024,500
Learning Objectives
- Comprehend the concepts related to documenting transactions with nonmonetary assets.
- Register the upgrade and acquisition of property, plant, and equipment in financial journals.
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