1. Our Company trades in old equipment that cost $121,500, has a book value of $74,500 and a fair value of $65,000. The new equipment has a list price of $141,000. We receive a trade in allowance for the old equipment of $75,000. This transaction has commercial substance. Prepare the journal entry to record this exchange. Answer: Debits Credits 2. Max's Company invests in the bonds issued by CarmCorp. On 1/1/21 Max buys $240,000 of 5% bonds that pay interest on 1/1. They mature in 10 years and yield 6%. Max pays $222,336. On 12/31/21, the fair value of the bonds is $243,200. Assuming the bonds are classified as "Trading", prepare the journal entries for 1/1/21, 12/31/21, and 1/1/22. You may omit (leave out) the closing entries. Answer: Debits Credits