Question

Requirement 1. Record the disposition of the equipment assuming the following independent situations: a. Dominico discarded the equipment, receiving $0. b. Dominico sold the equipment for $9,000 cash. C. Dominico traded the equipment in on a new piece of equipment costing $50,000. Dominico was granted a(n) $10,500 trade-in allowance for the old equipment and paid the difference in cash. Dominico traded the equipment in on a new piece of equipment costing $34,000. Dominico was granted a $2,500 trade-in allowance for the old equipment and signed a note payable for the difference. Print Done

Answer 1

1) The required journal entries for the given situations is shown as follows:-

Journal Entries (Amounts in $)

Date	Accounts	Debit	Credit
a)	Accumulated Depreciation	35,000
	Loss on Disposal-Equipment (42,000-35,000)	7,000
	Equipment		42,000
	(To record the sale of equipment)
b)	Cash	9,000
	Accumulated Depreciation	35,000
	Gain on Disposal-Equipment (Bal Fig) (35,000+9,000-42,000)		2,000
	Equipment		42,000
	(To record the sale of equipment)
c)	Equipment-New	50,000
	Accumulated Depreciation	35,000
	Gain on Exchange-Equipment (bal fig) (50,000+35,000-42,000-39,500)		3,500
	Equipment-Old		42,000
	Cash (50,000-10,500)		39,500
	(To record the exchange of Equipment)
d)	Equipment-New	34,000
	Accumulated Depreciation	35,000
	Loss on Exchange-Equipment (bal fig) (42,000+31,500-34,000-35,000)	4,500
	Equipment-Old		42,000
	Notes Payable (34,000-2,500)		31,500
	(To record the exchange of Equipment)

Working Notes:-

i) Accumulated depreciation will be debited and old equipment cost will be credited. The cash paid or received is adjusted and the balancing figure will be loss or gain on disposal/exchange as the case may be.