The production manager of Marigold Corporation wants to acquire a different brand of machine by exchanging the machine that it currently uses in operations for the brand of equipment that others in the industry are using. The brand being used by other companies is more comfortable for the operators because it has different attachments that allow the operators to adjust the controls for a variety of arm and hand positions. The production manager has received the following offers from other companies:
1. Secord Corp. offered to give Marigold a similar machine plus $9,890 in exchange for Marigold’s machine.
2. Bateman Corp. offered a straight exchange for a similar machine with essentially the same value in use.
3. Shripad Corp. offered to exchange a similar machine with the same value in use, but wanted $3,440 cash in addition to Marigold’s machine.
4. The production manager has also contacted Ansong Corporation, a dealer in machines. To obtain a new machine from Ansong, Marigold would have to pay $39,990 and also trade in its old machine.

Marigold’s machinery has a cost of $68,800, a net book value of $47,300, and a fair value of $39,560. The following table shows the information needed to record the machine exchange between the companies:

	Second	Batman	Shrip	Ansong
Machine cost	$51,600	$63,210	$68,800	$55,900
Accumulated depreciation—machinery	19,350	30,530	32,250	-0-
Fair value	29,670	39,560	43,000	79,550

For each of the four independent situations, assume that Marigold accepts the offer. Prepare the journal entries to record the exchange on the books of each company. Assume that transactions 2 and 3 lack commercial substance for Bateman Company and Shripad Company respectively.

Answer rating: 100% (QA)

Transaction 1 Marigold corporation Debit Credit Machineary 29670 Accumulated Depreciation Machinery ... View the full answer