Question

On January 1, 2017, Frostburg Company purchased for $68,500, equipment having a service life of six years and an estimated residual value of $4,000. Frostburg has recorded depreciation of the equipment using the straight-line method. On December 31, 2019, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $35,000. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2019.

General Journal:

Date	Accounts	Debit	Credit

Answer 1

Journal Entries:

Date	Account title and explanation	Debit	Credit
Dec 31,2019	Depreciation Expense [($68,500-$4,000)/6 years]	$10,750
	Accumulated depreciation-Equipment		$10,750
	[To record depreciation expense]
Dec 31,2019	Machinery	$35,000
	Accumulated depreciation-equipment [$10,750 x 3 years]	$32,250
	Loss on sale of equipment	$1,250
	Equipment		$68,500
	[To record exchange of old equipment for new machine]