Question
The production manager of Martinez Corporation wants to acquire a different brand of machine by exchanging the machine that it currently uses in operations for
The production manager of Martinez 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.Secord Corp. offered to give Martinez a similar machine plus $9,660 in exchange for Martinez's machine.2.Bateman Corp. offered a straight exchange for a similar machine with essentially the same value in use.3.Shripad Corp. offered to exchange a similar machine with the same value in use, but wanted $3,360 cash in addition to Martinez's machine.4.The production manager has also contacted Ansong Corporation, a dealer in machines. To obtain a new machine from Ansong, Martinez would have to pay $39,060 and also trade in its old machine.
Martinez's machinery has a cost of $67,200, a net book value of $46,200, and a fair value of $38,640. The following table shows the information needed to record the machine exchange between the companies:
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