Question

For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.) (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.)

Bramble Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Bramble Corporation gave the machine plus $435 to Sunland Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines.

		Bramble Corp. (Old Machine)			Sunland Co. (New Machine)
Machine cost		$371			$346
Accumulated depreciation		179			–0–
Fair value		109			544

Answer 1

In the books of Bramble Corp.
			Debit	Credit
New Machine A/c		Dr.	544
Accumulated depreciation on Old Machine A/c		Dr.	179
Loss on exchange of machinery A/c		Dr.	83
	To Old Machine A/c			371
	To Cash A/c			435
In the books of Sunland Co.
Old Machine A/c		Dr.	109
Cash A/c		Dr.	435
	To New Machine A/c			346
	To Profit on exchange of machinery A/c			198