Montgomery Company purchased an electric wax melter on April 30, 2016, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.

Instructions Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange

(a) has commercial substance, and

(b) lacks commercial substance. Montgomery’s year ends on December 31, and depreciation has been recorded through December 31, 2015.

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List price of new melter 15,800 Cash paid 10,000 Cost of old melter (5-year life, 700 residual value) 12,700 Accumulated depreciation (old melter-straight-line) 7,200 Fair value of old melter 5,200