Question

QS 8-14A Asset exchange LO P5

Caleb Co. owns a machine that costs $42,400 with accumulated depreciation of $18,400. Caleb exchanges the machine for a newer model that has a market value of $52,000.
  
1. Record the exchange assuming Caleb paid $30,000 cash and the exchange has commercial substance.
2. Record the exchange assuming Caleb pays $22,000 cash and the exchange lacks commercial substance.
  

Answer 1

Journal Entry- Exhnage has commercial Substance- Caleb
Date	Accoutn Tittle	Debit	Credit
	Accumulated Depreciation	$18,400.00
	Machine (New)	$52,000.00
	Loss on Exchange of Asset	$2,000.00
	Machine (old))		$42,400.00
	Cash		$30,000.00
	TO Record Machine Exchange made

Journal Entry- Exhnage has no commercial Substance
Date	Accoutn Tittle	Debit	Credit
	Accumulated Depreciation	$18,400.00
	Machine (New)	$52,000.00
	Machine (old))		$42,400.00
	Cash		$22,000.00
	Gain on Exchange of Asset		$6,000.00
	TO Record Machine Exchange made