Question

1. Our Company trades in old equipment that cost $32,000, has a book value of $21,000 and a fair market value of $24,500. The new equipment has a list price of $33,000. We receive a trade in allowance for the old equipment of $29,000. This transaction has commercial substance. Prepare the journal entry to record this exchange.

1B .Our Company trades in old equipment that cost $32,000, has a book value of $21,000 and a fair market value of $19,000. The new equipment has a list price of $33,000. We receive a trade in allowance for the old equipment of $23,000. This transaction has commercial substance. Prepare the journal entry to record this exchange.

1C.Our Company trades in old equipment that cost $75,000, has a book value of $67,500 and a fair market value of $80,000. The new equipment has a list price of $85,000. We receive a trade in allowance for the old equipment of $80,000. This transaction lacks commercial substance. Prepare the journal entry to record this exchange

1D. Our Company trades in old equipment that cost $100,000, has a book value of $68,000 and a fair market value of $85,000. The new equipment has a fair value of $80,000. In addition, we receive $5,000 in cash. This transaction lacks commercial substance. Prepare the journal entry to record this exchange.

Answer 1

Journal Entries to record Fixed assest exchange with and without commercial substance

No.	Particulars	Debit	Credit
1A	New Equipment A/c Dr, To Old Equipment A/c To Profit on sale of old equipment A/c             To Cash A/c	$33,000	$21,000 $8,000    $4,000
1B	New Equipment A/c Dr, To Old Equipment A/c To Profit on sale of old equipment A/c             To Cash A/c	$33,000	$21,000     $2,000 $10,000
1C	New Equipment A/c Dr, To Old Equipment A/c	$67,500	$67,500
1D	New Equipment A/c Dr, Cash A/c Dr, To Old Equipment A/c	$63,000    $5,000	$68,000