3

Pharoah Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,160plus trade-in, f.o.b. factory. Pharoah Inc. paid $8,160cash and traded in used equipment. The used equipment had originally cost $63,240; it had a book value of $42,840and a secondhand fair value of $48,756, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,122.

(a)

Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance