Problem 1

J & J is considering replacing some of their older computers. Give the potential entries given the following scenarios. Assume all scenarios are independent and have no commercial substance.

a. Fourteen new computers - $140,000, additional $2,000 for freight and 6% tax on $140,000. Estimated useful life is 5 years with 5% salvage value. They are treated as a single unit for financial reporting purposes. No trade-ins.

b. Ten existing computers will be traded in (total trade-in value $10,000) for the new computers. The computers are treated as a single unit with an original cost of $80,000 and book value of $8,000. The remainder was paid in cash. They are treated as a single unit for financial reporting purposes

c. Ten existing computers will be traded in (total trade-in value $20,000) for the new computers. The computers are treated as a single unit with an original cost of $80,000 and book value of $20,000. The remainder was paid in cash. They are treated as a single unit for financial reporting purposes

Required: Prepare the potential journal entries for the above events.

Problem 2 Repeat each of the above requirements assuming commercial substance.