Yintang Group has negotiated the purchase of a new piece of automatic equipment at a price of HK$7,000 plus trade-in, f.o.b. factory. Yintang paid HK$7,000 cash and traded in used equipment. The used equipment had originally cost HK$62,000; it had a book value of HK$42,000 and a secondhand fair value of HK$45,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of HK$1,100.
Instructions
a. Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance.
b. Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable, prepare the general journal entry to record this transaction.