Napali Inc. sells new equipment with a $5,300 list price. A dissatisfied customer returned one piece of equipment. Napali determines that the returned equipment can be resold if it is reconditioned. The expected sales price of the reconditioned equipment is $4,500; the reconditioning expenses are estimated to be $600; and normal profit is 35% of the sales price.

1. Prepare the journal entry to record the sale of the reconditioned equipment for cash assuming that the floor value is used to record the returned equipment.

2. Prepare the journal entry to record the sale of the reconditioned equipment for cash assuming that the original list price is used to record the returned equipment.

3. Evaluate the entries.