Commerce Bank recently traded in office fixtures. Here are the facts:
Old fixturesNew fixtures:
Cost, $99,000............... Cash paid, $ 108,000
Accumulated depreciation, $65,000......Market value, $ 142,000
Requirements
1. Record Commerce Bank’s trade-in of old fixtures for new ones. Assume the exchange had commercial substance.
2. Now let’s change one fact. Commerce Bank feels compelled to do business with Shoreside Furniture, a bank customer, even though the bank can get the fixtures elsewhere at a better price. Commerce Bank is aware that the new fixtures’ market value is only $135,000. Record the trade-in. Assume the exchange had commercial substance.