Minneapolis Inc. has equipment with an original cost of $56,000 and accumulated depreciation of $32,000. This equipment was traded in for new equipment with a list price of $64,000. The new machine can be purchased without a trade-in for $60,000 cash. The difference between the fair value of the new asset and the market value of the old asset will be paid in cash.

Possible entry options

Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $40,000 cash is paid. c. The same as in part b except that the transaction lacks commercial substance. a. Account Name Dr. Cr. 0 0 0 0 b. Account Name Dr. Cr. 0 0 Equipment (new) Accumulated Depreciation 0 0 O 0 0 O Equipment (old) 0 O b. Account Name Dr. Cr. O o Equipment (new) Accumulated Depreciation 0 o o . O O O Equipment (old) O O Dlencenewerallarte of the auction Cash Prepaid Insurance Equipment Building Land Construction in Process Accumulated Depreciation Accounts Payable Property Tax Payable Asset Retirement Obligation Note Payable Discount on Note Payable Common Stock Paid-in Capital in Excess of Par-Common Stock Contribution Revenue Gain on Asset Exchange Accretion Expense Depreciation Expense Insurance Expense Interest Expense Repair Expense Loss on Asset Exchange Loss on Asset Replacement Loss on Construction of Building Loss on Disposal Loss on Settlement of Asset Retirement Obligation N/A Prepare the entry to record acquisition of the new machine under each of the following separate cases. a. The new machine is purchased for cash with no trade-in. b. The transaction has commercial substance. The old equipment is traded in, and $40,000 cash is paid. c. The same as in part b except that the transaction lacks commercial substance. a. Account Name Dr. Cr. 0 0 0 0 b. Account Name Dr. Cr. 0 0 Equipment (new) Accumulated Depreciation 0 0 O 0 0 O Equipment (old) 0 O b. Account Name Dr. Cr. O o Equipment (new) Accumulated Depreciation 0 o o . O O O Equipment (old) O O Dlencenewerallarte of the auction Cash Prepaid Insurance Equipment Building Land Construction in Process Accumulated Depreciation Accounts Payable Property Tax Payable Asset Retirement Obligation Note Payable Discount on Note Payable Common Stock Paid-in Capital in Excess of Par-Common Stock Contribution Revenue Gain on Asset Exchange Accretion Expense Depreciation Expense Insurance Expense Interest Expense Repair Expense Loss on Asset Exchange Loss on Asset Replacement Loss on Construction of Building Loss on Disposal Loss on Settlement of Asset Retirement Obligation N/A