Journal entries (6) On May 1, 20x7 an old pressing machine was traded in for a n
ID: 2375798 • Letter: J
Question
Journal entries
(6)On May 1, 20x7 an old pressing machine was traded in for a new computerized processing machine. These machines were used on different production lines and considered as dissimilar equipment. The old pressing machine cost $157,000 when it was purchased on May 1, 20x3 and had a useful life of 8 years with a salvage value of $13,000. A $90,000 trade-in allowance was given for the pressing machine. The new processing machine had a list price of $350,000, but only cost the company $260,000 after the trade-in. The new machine had a nine-year useful life with a $26,000 salvage value. The company paid $52,000 down and signed a note payable for the balance due.
(7) August 1, 20x7 the company had to complete a major overhaul on an assembly machine. The machine had been purchased for $430,000 on August 1, 20x2. The machine was expected to last for 12 years with a $70,000 salvage value. If the repairs had not been completed, the machine would not function efficiently in the company and would have to be disposed for its parts, which would have brought the company about $30,000. The cost of the repairs was $33,000, but the overhaul was expected to add 2 years onto the remaining life of the machine. The repairs were paid for in cash.
(8) On September 1, 20x7 the company traded in a sorting machine which had cost $135,000 when purchased on March 1, 20x0 for a similar new sorting machine with a purchase price of $210,000. The old machine had a ten-year useful life with a $15,000 salvage value. Gray & Greene received $52,000 as a trade-in value on the old machine. The new sorting machine is expected to have an eight-year life with an $11,000 salvage value. The company paid $40,000 in cash and signed a 3-year note for the balance due.
Explanation / Answer
6. DR Equipment (computerized processing) 345,000
DR Accumulated depreciation (old machine) 72,000
CR Equipment (old machine) 157,000
CR Cash 52,000
CR Note Payable 208,000
7. DR Equipment 33,000
CR Cash 33,000
8 DR Equipment (new machine) 203,000
DR Accum dep (old machine) 90,000
CR Equipment (old machine) 135,000
CR Cash 40,000
CR Note Payable 118,000
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