Question

Caleb Co. owns a machine that had cost $48,800 with accumulated depreciation of $21,600. Caleb exchanges the machine for a newer model that has a market value of $57,000. 1. Record the exchange assuming Caleb paid $33,200 cash and the exchange has commercial substance. 2. Record the exchange assuming Caleb paid $25,200 cash and the exchange has commercial substance.

Answer 1

1	New Machine		Dr	57,000
	Accumulated Depreciation	Dr	21,600
	Loss on Exchange		Dr	3,400
	To	Cash			Cr	33,200
	To	Old Machine			Cr	48,800
	(Being Old Machine exchanged with new machine and cash paid)
2	New Machine		Dr	57,000
	Accumulated Depreciation	Dr	21,600
	To	Cash			Cr	25,200
	To	Old Machine			Cr	48,800
	To	Gain on Exchange		Cr	4,600
	(Being Old Machine exchanged with new machine and cash paid)