Exercise 10-18

Cannondale Company purchased an electric wax melter on April 30, 2020, 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		$15,800
Cash paid		10,000
Cost of old melter (5-year life, $700 salvage value)		11,200
Accumulated Depreciation-old melter (straight-line)		6,300
Secondhand fair value of old melter		5,200

Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cannondales fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019. (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 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
(a)	Exchange has commercial substance:
	(To record current depreciation.)
	(To record exchange of the equipment.)
(b)	Exchange lacks commercial substance:
	(To record current depreciation.)
	(To record exchange of the equipment.)

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