Fritz Inc. decides to trade a machine that originally cost $20,000 and has accum

Question

Fritz Inc. decides to trade a machine that originally cost $20,000 and has accumulated depreciation of $15,000. the new machine will have an invoice price of $12,500; the company pays cash in the amount of $6,000. The journal entry to record the exchange would be:
a. (dr)Machinery $12,500
(dr)Accum. Depreciation, Machinery $15,000
(cr)Cash $6,000
(cr)Gain on Exchange of Machinery $1,500

b.(cr)Machinery $20,000
(dr)Machinery $13,500
(dr)Accum. Depr., Machinery $15,000
(cr)Cash $6,000

c.(cr)Gain on Sale of Machinery $2,500
(cr)Machinery $20,000
(dr)Machinery $11,000
(dr)Accum. Depr., Machinery $15,000
(cr)Cash $6,000
(cr)Machinery $20,000

d.none of the above would be the correct entry.

Explanation / Answer

Option "d " is the correct answer the correct enrtry would be (dr) machinary 12500 (cr) cash 6000 (cr) gain on exchange 1500 (cr)remaining value of the asset 5000

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