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Exercise 10-18 Ayayai 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 Cash paid Cost of old melter (5-year life, $896 salvage value) Accumulated Depreciation-old melter (straight-line) Secondhand fair value of old melter $20,224 12,800 14,336 8,064 6,656 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Ayayai's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit No. Account Titles and Explanation (a) Exchange has commercial substance: Depreciation Expense 896 896 Accumulated Depreciati (To record current depreciation.) Machinery Accumulated Depreciation Cash 12800 Machinery 14336 Gain on Disposal of Machir (To record exchange of the equipment.) (b) Exchange lacks commercial substance: Depreciation Expense 896 896 Accumulated Depreciati (To record current depreciation.) Machinery Accumulated Depreciation Cash Machinery Gain on Disposal of Machir (To record exchange of the equipment.) Indigo Company exchanged equipment used in its manufacturing operations plus $4,140 in cash for similar equipment used in the operations of Sweet Company. The following information pertains to the exchange. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up Indigo Co. $38,640 26,220 17,250 4,140 Sweet Co. $38,640 13,800 21,390 *(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Account Titles and Explanation Indigo Company: Equipment Accumulated Depreciation Equipment Cash Sweet Company: Equipment Accumulated Depreciation Cash Loss on Disposal of Equipr Equipment Attempts: 0 of 3 used *Problem 10-9 (Part Level Submission) On August 1, Waterway, Inc. exchanged productive assets with Wildhorse, Inc. Waterway's asset is referred to below as "Asset A," and Wildhorse' is referred to as "Asset B." The following facts pertain to these assets. Original cost Accumulated depreciation (to date of exchange) Fair value at date of exchange Cash paid by Waterway, Inc. Cash received by Wildhorse, Inc. Asset A $101,760 42,400 63,600 15,900 Asset B $116,600 49,820 79,500 15,900 *(a) Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Waterway, Inc. and Wildhorse, Inc. in accordance with generally accepted accounting principles. (Round answers to o decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Account Titles and Explanation Waterway, Inc.'s Books Machinery (B) Accumulated Depreciation Machinery (A) Cash Gain on Disposal of Machii Wildhorse, Inc.'s Books Machinery (A) Accumulated Depreciation Cash Gain on Disposal of Machi Machinery (8) Attempts: 0 of 3 used