Question

Caleb Co. owns a machine that had cost $49,600 with accumulated depreciation of $22,000. Caleb exchanges the machine for a newer model that has a market value of $59,000. 1. Record the exchange assuming Caleb paid $33,600 cash and the exchange has commercial substance. 2. Record the exchange assuming Caleb paid $25,600 cash and the exchange has commercial substance View transaction list View journal entry worksheet No Transaction Credit General Journal Machinery (new) Accumulated depreciation—Machinery (old) Loss on exchange of assets Machinery (old) Cash Debit 59,000 22,000 2,200 49,600 33,600 53,200 22,000 Machinery (new) Accumulated depreciation Machinery (old) Gain on exchange of assets Cash Machinery (old) 25,600 49,600

Answer 1

Answer
Journal entry :
1. Record the exchange assuming Caleb paid $33,600 cash and the exchange has commercial substance.
NO	accounts & explanation	Debit	Credit
A	Accumulated dep (Old)	22000
	Machine a/c (New)	$     59,000
	Loss on exchange of asset	$       2,200
	Machine a/c (Old)		$     49,600
	Cash a/c		$     33,600
	(To record exchange)

Journal entry :
2. Record the exchange assuming Caleb paid $25,600 cash and the exchange has commercial substance.
Date	accounts & explanation	Debit	Credit
B	Accumulated dep (Old)	$     22,000
	Machine a/c (New)	$     59,000
	Gain on exchange of asset		$       5,800
	Machine a/c (Old)		$     49,600
	Cash a/c		$     25,600
	(To record exchange)

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