Cannondale Company purchased an electric wax melter on April 30, 2017, by trad-

Question

Cannondale Company purchased an electric wax melter on April 30, 2017, by trad- ing in its old gas model and paying the balance in cash. The following data relate to the purchase. List price of new melter Cash paid Cost of old melter (5-year life, $700 salvage value) Accumulated depreciation-old melter (straight-line) $15,800 10,000 11,200 6,300 5,200 Secondhand fair value of old melter Instructions Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cannondale's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. Show all calculations

Explanation / Answer

Solution:-

(a) Has commercial substance:-

(b) Lacks commercial substance:-

Please Rate or comment if you have any doubt regarding this solution.

Account titles and explanation Debit Credit Depreciation expenses 700 Accumulated depreciation 700 (11,200 - 700) / 5 * (4/12) = 700 Melter (new) 15,200 Accumulated depreciaiton 7,000 Gain on disposal of melter 1,000 Melter (old) 11,200 Cash 10,000 MV (5,200) > BV (4,200) = 1000 Gain

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.