Cannondale Company purchased an electric wax melter on April 30, 2020, by trading in its old gas
Question:
Cannondale Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
List price of new melter............................................................$15,800
Cash paid......................................................................................10,000
Cost of old melter (5-year life, $700 salvage value).................11,200
Accumulated depreciation—old melter (straight-line).............6,300
Secondhand fair value of old melter...........................................5,200
Instructions
Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange
(a) Has commercial substance,
(b) Lacks commercial substance. Cannondale’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019.
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel