Exercise 10-18 Internet Explorer Fle Edt View Fates ToolsHel Culver Company parc

Question

Exercise 10-18 Internet Explorer Fle Edt View Fates ToolsHel Culver Company parchased an electric wax melter on April 30, 2017, by trading in its d gas model and paying the balance in cash. The following data relate to the purchase List price of new meter $22,A% 14,200 15,904 8,946 7,384 Cash paid Cont of sid melter (5- year ife, 914 salvage val Secundhand fair value of ld melter Prepare the jurnal entries necessary to recand this exchange, accuming that the exchange (a) has commercial becundated Deprediation-old melter (straight ine substance, and (b) lacks commerdial sabot ance. Culvers fiscal year ends on December 31, and deprecdiation has been urded through Deonbet ?1,2016. (Credit acrount 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 enfer for the amounts No. Acconant itles and Explanation (To record current deprediation.) ember 31, an 0 for the a

Explanation / Answer

a)Has commercial substance
Current depreciation=(Cost of old meter-salvage value)/useful life)*(4/12)
=((15904-994)/5)*(4/12)=994
Depreciation expense(db) 994
accumulated depreciation(Cr)994
To record exchnage of equipment:
Melter-new (db) 14200+7384=21584
Accumulated depreciation(db) 8946+994=9940
Gain on disposal(cr) 1420
Melter-old (Cr) 15904
Cash(Cr) 14200
b)lacks commercial substance:
Depreciation expense(db) 994
accumulated depreciation(Cr)994
Depreciation expense(db) 994
accumulated depreciation(Cr)994
To record exchnage of equipment:
Melter-new (db) 14200+7384=21584
Accumulated depreciation(db) 8946+994=9940
Gain on disposal(cr) 1420

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