A machine cost $231,600, has annual depreciation expense of $46,320, and has accumulated depreciation of $115,800 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $92,620, it is exchanged for a similar machine with a fair value of $290,600 and the proper amount of cash is paid. The exchange lacked commercial substance.

Prepare entries that are necessary at April 1, 2018.

debt credit

April 1 2018 depreciation expense

Accumulated depreication machinery

(to record deprication)

April 1 2018 Accumulated depreiciation machinery

Machinery

Loss on disposal of machinery

Machinery

Cash

(to record exchange of machinery)