Question

Exercise 10-17 Martinez 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. Martinez Corporation gave the machine plus $360 to Sandhill Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines. Martinez Corp. Sandhill Co. Old Machine) (New Machine) $307 148 91 Machine cost $286 Fair value 451 For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.) (Credit account tities are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account tities and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

--Martinez Corporation:

Accounts title	Debit	Credit	Working
Equipment [new machine]	$451		[Fair value of new machine]
Accumulated Depreciation	$148		[Depreciation of old machine]
Loss on sale/exchange	$68		[$ 360 + 307 - 451 - 148]
Cash		$360	[Cash paid]
Equipment [old machine]		$307	[Cost of old machine]
(Machine exchanged)

--Sandhill Company

Accounts title	Debit	Credit	Working
Cash	$360		[Cash received]
Equipment	$91		[Fair value of asset received]
Equipment		$286	[Cost of asset given up]
Gain on Exchange/sale		$165	[$360 + 91 - 286]
(machine exchanged)