Sandhill 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 $23,700 Cash paid 15,000 Cost of old melter (5 year life, $1,050 salvage value) 16,800 Accumulated Depreciation old melter (straight line) 9,450 Secondhand fair value of old melter 7,800 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance Sandhills fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016 unt Titles and Explanation No Acco Debit Credit (a) Exchange has commercial substance Depreciation Expense 1050 Accumulated Depreciation (To record current depreciation ) Equipment Accumulated Depreciation Machinery Machinery 1050 Equipment 16800 Cash 15000 Gain on Disposal of Machinery To record exchange of the equipment ) (b) Exchange lacks commercial substance Depreciation Expense 1050 Accumulated Depreciation (To record current depreciation ) Machinery Accumulated Depreciation Machinery Gain on Disposal of Machinery Machinery 1050 Equipment 16800 Cash 15000 To record exchange of the equipment )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 15, 2024

Sandhill Company purchased an electric wax melter on April 30, 2017, by trading in its old gas model and paying the balance in cash. The

Sandhill 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		$23,700
Cash paid		15,000
Cost of old melter (5-year life, $1,050 salvage value)		16,800
Accumulated Depreciation-old melter (straight-line)		9,450
Secondhand fair value of old melter		7,800

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

image text in transcribed

unt Titles and Explanation No. Acco Debit Credit (a) Exchange has commercial substance: Depreciation Expense 1050 Accumulated Depreciation (To record current depreciation.) Equipment Accumulated Depreciation-Machinery -Machinery 1050 Equipment 16800 Cash 15000 Gain on Disposal of Machinery To record exchange of the equipment.) (b) Exchange lacks commercial substance Depreciation Expense 1050 Accumulated Depreciation (To record current depreciation.) Machinery Accumulated Depreciation-Machinery Gain on Disposal of Machinery -Machinery 1050 Equipment 16800 Cash 15000 To record exchange of the equipment.)