Exercise 10-18

Cheyenne 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		$18,960
Cash paid		12,000
Cost of old melter (5-year life, $840 salvage value)		13,440
Accumulated Depreciation-old melter (straight-line)		7,560
Secondhand fair value of old melter		6,240

Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cheyennes fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016.

Part A: Exchange Has Commercial Substance - Record Exchange of the Machine **Only need answers for parts with "???" - all other answers are correct**

Debit Equipment ???

Debit Accumulated Depreciation - Equipment 8,400

Credit Cash 12,000

Credit Equipment 13,440

Credit Gain on Disposal of Equipment ???

Part B: Exchange Lacks Commercial Substance - Record Exchange of the Machine **Only need answers for parts with "???" - all other answers are correct**

Debit Equipment ???

Debit Accumulated Depreciation - Equipment 8,400

Credit Cash 12,000

Credit Equipment 13,440

Credit Gain on Disposal of Equipment ???