*Exercise 10-20 Novak Inc. has negotiated the purchase of a new piece of automat
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Question
*Exercise 10-20 Novak Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $10,400 plus trade-in, f..b. factory. Novak Inc. paid $10,400 cash and traded in used equipment. The used equipment had originally cost $80,600; it had a book value of $54,600 and a secondhand fair value of $62,140, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,430. Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit 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. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Question Attempts: O of 3 used Copyright2000-2018 by Sohn Wiley&Sons;, Inc. or reiated companies.All rights reservedExplanation / Answer
(a) Automatic Equipment $ 73,970
Accumulated Depreciation-Equipment $ 26,000
Equipment $ 80,600
Cash $ 11,830
Gain on Disposal of Equipment $ 7,540
Accumulated Depreciation-Equipment = $80,600 - $54,600 = $26,000
Cost of new equipment = $10,400 + $1,430 + $62,140 = $73,970
Gain on disposal of equipment = $62,140 - $54,600 = $7,540
(b) Automatic Equipment $ 66,430
Accumulated Depreciation-Equipment $ 26,000
Equipment $ 80,600
Cash $ 11,830
Automatic Equipment = $54,600 + 10,400 + $1,430 = $66,430
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