Sage Hill Inc. purchased a commercial-grade soft-serve ice cream machine on September 30, 2017. Sage Hill traded
Question:
Sage Hill Inc. purchased a commercial-grade soft-serve ice cream machine on September 30, 2017. Sage Hill traded in its existing machine and paid cash in the transaction. The details of the transaction are as follows:
● | The list price of a new freezer | $21,995 | ||
● | Cash paid | 14,628 | ||
● | Cost of old machine (4-year life, $1,590 salvage value) | 18,550 | ||
● | Accumulated depreciation—old machine (straight-line) | 8,480 | ||
● | The secondhand fair value of old machine | 7,102 |
Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance.
Sage Hill’s fiscal year ends on December 31, and Sage Hill recorded depreciation on the old machine through September 30, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No. | Account Titles and Explanation | Debit | Credit |
---|---|---|---|
(a) | Exchange has commercial substance: | ||
enter an account title To record current depreciation | enter a debit amount | enter a credit amount | |
enter an account title To record current depreciation | enter a debit amount | enter a credit amount | |
(To record current depreciation) | |||
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
(To record exchange of the machine) | |||
(b) | Exchange lacks commercial substance: | ||
enter an account title To record current depreciation | enter a debit amount | enter a credit amount | |
enter an account title To record current depreciation | enter a debit amount | enter a credit amount | |
(To record current depreciation) | |||
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
enter an account title To record the exchange of the machine | enter a debit amount | enter a credit amount | |
(To record exchange of the machine) |
Horngrens Accounting
ISBN: 978-0133855388
10th Canadian edition Volume 2
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood