Question

Cannondale Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase. $15,800 List price of new melter Cash paid Cost of old melter (5-year life, $700 salvage value) 10,000 11,200 Accumulated Depreciation-old melter (straight-line) 6,300 Secondhand fair value of old melter 5,200 Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cannondale's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2019. (Credit acCcount 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.) No. Account Titles and Explanation Debit Credit (a) Exchange has commercial substance: Depreciation Expense Accumulated Depreciation (To record current depreciation.) Accumulated Depreciation- Equipment Gain on Disposal of Equipn

Answer 1

Exchange has commercial substance Debit Too credit Depreciation Expense Accumulated Depreciation - Equipment (Depreciation for 4 months) Too Accumulated Depreciation -fquipment 7000 Equipment (New) 15,800 Gain on Disposal of Equipment Cash Equipment (old) 1,600 (bol) 10,000 11,200 ( exchange of Asset)

Credit Too Exchange lacks commercial substance Debit Depreciation Expense Тео Accumulated Depovcicthión a Equipment (current 4 months depreciation) Alcuniulated Depreciation Tooo Equipment (New) 114,200 cash Equipment Cold) Gain on Disposal of Equipment 10,000 11,200

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