Question

Stellar Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Stellar Corporation gave the machine plus $442 to Pearl Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines.

		Stellar Corp. (Old Machine)			Pearl Co. (New Machine)
Machine cost		$377			$351
Accumulated depreciation		182			–0–
Fair value		111			553

For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Stellar Corporation
Pearl Business Machine Company

Answer 1

The Journal entry is shown below:-

For Stellar Corporation

For Pearl Business Machine Company