Exercise 10-18

Headland 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		$22,436
Cash paid		14,200
Cost of old melter (5-year life, $994 salvage value)		15,904
Accumulated Depreciation-old melter (straight-line)		8,946
Secondhand fair value of old melter		7,384

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

No.	Account Titles and Explanation	Debit	Credit
(B)	Exchange lacks commercial substance
	(to record current depreciation)
	(to record exchange of the equipment.)

(List of Accounts)

Accounts Payable Accumulated Depreciation-Building Accumulated Depreciation-Equipment Accumulated Depreciation-Machinery Accumulated Depreciation-Trucks Buildings Cash Common Stock Contribution Revenue Cost of Goods Sold Depreciation Expense Direct Labor Discount on Notes Payable Equipment Factory Overhead Gain on Disposal of Buildings Gain on Disposal of Equipment Gain on Disposal of Machinery Gain on Disposal of Trucks Insurance Expense Interest Expense Inventory Land Land Improvements Loss on Disposal of Buildings Loss on Disposal of Equipment Loss on Disposal of Machinery Loss on Disposal of Trucks Machinery Maintenance and Repairs Expense Materials No Entry Notes Payable Organization Expense Paid-in Capital in Excess of Par - Common Stock Prepaid Insurance Retained Earnings Salaries and Wages Expense Sales Revenue Trading Securities Trucks