The production manager of Marigold Corporation wants to acquire a different brand of machine by exchanging the machine that it currently uses in operations for the brand of equipment that others in the industry are using. The brand being used by other companies is more comfortable for the operators because it has different attachments that allow the operators to adjust the controls for a variety of arm and hand positions. The production manager has received the following offers from other companies: 1. 2. 3. Secord Corp. offered to give Marigold a similar machine plus $21,850 in exchange for Marigold's machine. Bateman Corp. offered a straight exchange for a similar machine with essentially the same value in use. Shripad Corp. offered to exchange a similar machine with the same value in use, but wanted $7,600 cash in addition to Marigold's machine. Assume that the exchange is nonmonetary and lacks commercial substance. The production manager has also contacted Ansong Corporation, a dealer in machines. To obtain a new machine from Ansong, Marigold would have to pay $88,350 and also trade in its old machine. 4. Marigold's equipment has a cost of $152,000, a net book value of $104,500, and a fair value of $87,400. The following table shows the information needed to record the machine exchange between the companies: Machine cost Accumulated depreciation-machinery Fair value Secord $114,000 42,750 65,550 Bateman $139.650 67.450 87,400 Shripad $152,000 71,250 95,000 Ansong $123,500 -0- 175.750 Bateman Machine cost Accumulated depreciation-machinery Fair value Secord $114,000 42,750 65,550 $139,650 67.450 87,400 Shripad $152,000 71.250 95,000 Ansong $123,500 -0- 175,750 For each of the four independent situations, assume that Marigold accepts the offer, Prepare the journal entries to record the exchange on the books of each company. Assume that transactions 2 and 3 lack commercial substance for Bateman Company and Shripad Company respectively. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts.) Transaction 1: Marigold Corporation Debit Credit Account Titles and Explanation 21850 Cash Accumulated Depreciation Machinery Machinery Loss on Disposal of Machinery Marigold Corporation Debit Account Titles and Explanation Cash Credit 21850 Accumulated Depreciation Machinery Machinery Loss on Disposal of Machinery Machinery Secord Company Account Titles and Explanation Debit Credit Transaction 2: Marigold Corporation Debit Account Titles and Explanation Credit Bateman Company Debit Credit Account Titles and Explanation Transaction 3: Marigold Corporation Debit Account Titles and Explanation Credit Shripad Company Debit Credit Account Titles and Explanation Transaction 4 Marigold Corporation Debit Account Titles and Explanation Credit Ansong Corporation Debit Credit Account Titles and Explanation (To record sale with trade-in) Ansong Corporation Account Titles and Explanation Debit Credit (To record sale with trade-in) (To record cost of goods sold.)
