Homework Answers
| a) Depreciation for Old Machine | |||
| Particulars | Amount | ||
| Cost of machine | 260,000 | ||
| Useful life | 10 years | ||
| Salvage value | 20,000 | ||
| Depreciation per year | 24,000 | ||
| (Cost of machine-Salvage value)/Useful life | |||
| Year | O/g book value | Depreciation | C/g book value |
| 2020 | 260,000 | 24,000 | 236,000 |
| 2021 | 236,000 | 24,000 | 212,000 |
| 2022 | 212,000 | 24,000 | 188,000 |
| 2023 | 188,000 | 24,000 | 164,000 |
| 2024 | 164,000 | 24,000 | 140,000 |
| Jul 2025 (24k*7/12) | 140,000 | 14,000 | 126,000 |
b) Journal entry for exchange on Aug1
| Book value of Old machine | Cost-Accumulated depreciation | ||
| =260,000-126,000 | |||
| 134,000 | |||
| Fair value of old machine | 185,000 | ||
| Fair value of New machine | 157,250 | ||
| Excess cash received | 27,750 | ||
| Total benefit received on exchange | =157250+27750-134000 | ||
| (FV of new machine+ cash-book value) | 51,000 | ||
| Gain on exchange | 51,000 | ||
| Journal entry | |||
| Dr/Cr | Particulars | Debit | Credit |
| Dr | New Machine | 157,250 | |
| Dr | Cash | 27,750 | |
| Dr | Accumulated depreciation | 126,000 | |
| Cr | Old Machine | 260,000 | |
| Cr | Gain on exchange of machinery | 51,000 | |
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chio 3 of Dware Com Question 3: Non-monetary exchange. Rogers Co. had a sheet metal culter that cost $96.000 on January 5, 2010. This old cutter had an estimated life of ten years and a salvage value o ST6,000 and Accumulated depreciation of $42,000 On January 1, 2015, the old cutter is exchanged for a new cutter with a fair value of $48,000. The exchange had commercial substance. Rogers also paid $12,000 cash. Assume that the last fiscal...
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