Question

Novak Corporation wishes to exchange a machine used in its operations. Novak has received the following offers from other companies in the industry. 1. Splish Company offered to exchange a similar machine plus $33,120. (The exchange has commercial substance for both parties.) 2. Blossom Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.) 3. Blue Company offered to exchange a similar machine, but wanted $4,320 in addition to Novak’s machine. (The exchange has commercial substance for both parties.) In addition, Novak contacted Kingbird Corporation, a dealer in machines. To obtain a new machine, Novak must pay $133,920 in addition to trading in its old machine. Novak Splish Blossom Blue Kingbird Machine cost $230,400 $172,800 $218,880 $230,400 $187,200 Accumulated depreciation 86,400 64,800 102,240 108,000 –0– Fair value 132,480 99,360 132,480 136,800 266,400 For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (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.)

Answer 1

ANSWER
No	Particulars	Debit	Credit
1	Novak
	Cash	33120
	Machinery	99360
	Accumulated depreciation	86400
	Loss on disposal of machinery [ $230400-86400-132480]	11520
	Machinery		230400
	Splish
	Machinery	132480
	Accumulated depreciation	64800
	Loss on disposal of machinery [ $172800-64800-99360.]	8640
	Cash		33120
	Machinery		172800
2	Novak
	Machinery	132480
	Accumulated Depreciation-Machinery	86400
	Loss on Disposal of Machine [ $230400-86400-132480]	11520
	Machinery		230400
	Blossom
	Machinery [ $218880-102240	116640
	Accumulated Depreciation-Machinery	102240
	Machinery		218880
3	Novak
	Machinery	136800
	Accumulated Depreciation-Machinery	86400
	Loss on Disposal of Machine [ $230400-86400-132480	11520
	Machinery		230400
	Cash		4320
	Blue
	Machinery	132480
	Accumulated Depreciation-Machinery	108000
	Cash	4320
	Machinery		230400
	Loss on Disposal of Machine [ $230400-108000-136800		14400
4	Novak
	Machinery	266400
	Accumulated Depreciation-Machinery	86400
	Loss on disposal of machinery [ $230400-86400-132480]	11520
	Machinery		133920
	Cash		230400
	Kingbird
	Cash	133920
	Inventory	132480
	Sales Revenue		266400
	Cost of Goods Sold	187200
	Inventory		187200