Busytown Corporation, which manufactures shoes, hired a recent college graduate
ID: 2491054 • Letter: B
Question
Busytown 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. Busytown Corporation gave the machine plus $779 to Dick Tracy Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines.
Busytown Corp
(Old Machine)
Dick Tracy Co.
(New Machine)
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.)
Busytown Corporation
Dick Tracy Business Machine Company
Busytown Corp
(Old Machine)
Dick Tracy Co.
(New Machine)
Machine Cost $664 $619 Accumulated Depreciation $321 -0- Fair Value $195 $974Explanation / Answer
cost of machine 664 accumulated depreciation 321 remaining value of machine 343 fair value of machine 195 loss 148 journal entry in the books of busytown machine debit 974 accumulated depreciation debit 321 loss on disposal of machine 148 credit machine 664 credit cash 779 journal entry in the books of tracy business cash debit 779 inventory debit 195 cost of goods sold 619 credit sales 974 credit inventory 619
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