Cheyenne Company purchased an electric wax melter on April 30, 2017, by trading in its old gas model and paying the balance in cash.
The following data relate to the purchase.
|List price of new melter||$18,960|
|Cost of old melter (5-year life, $840 salvage value)||13,440|
|Accumulated Depreciation-old melter (straight-line)||7,560|
|Secondhand fair value of old melter||6,240|
Cheyenne's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016.
Prepare the journal entries necessary to record this exchange, assuming that the exchange
(a) has commercial substance, and
(b) lacks commercial substance.
Answer and Explanation:
A. With commercial substance
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from Accounting 101: Financial AccountingChapter 9 / Lesson 4