Question

Yount Company exchanged an old machine (cost $150,000 less $90,000 accumulated depreciation) plus $10,000 cash for a new machine. The old machine had a fair value of $54,000 (b) Lawson Company trades old equipment (cost $90,000 less $54,000 accumulated depreciation) for new equipment. Lawson paid $36,000 cash in the trade. The old equipment that was traded had a fair value of $54,000. The transaction has commercial substance. Prepare the entry to record the exchange of assets by Yount 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 for the amounts.) Account Titles and Explanation Debit Credit Prepare the entry to record the exchange of assets by Lawson 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 for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

(a)	Account titles and explanation					Debit	Credit
	Machine (New)				(Note:1)	64000
	Accumulated depreciation					90000
	Loss on sale of machine			(Balancing figure)		6000
	Machine (Old)						150000
	Cash						10000
	Note:1	Cost of new machine=Fair value of old machine+Cash paid on exchange=54000+10000=$ 64000
(b)	Account titles and explanation					Debit	Credit
	Machine (New)			(at cost of old machine)		90000
	Accumulated depreciation					54000
	Machine (Old)						90000
	Cash						36000
	Gain on sale of machine			(Balancing figure)			18000