\"Exercise 10-18 Martinez Company purchased an electric wax melter on Aprill 30,
ID: 2549526 • Letter: #
Question
"Exercise 10-18 Martinez Company purchased an electric wax melter on Aprill 30, 2017, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase. List price of new melter Cash paid $23,068 14,600 16,352 9,198 Cost of old melter (5-year life, $1,022 salvage value) Accumulated Depreclation-old melter (straight-line) Secondhand fair value of old meiter Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Martinez's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. (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 O for the amounts.) No. Account Titles and Explanation Debit Credit (To record current depreciation.) To record exchange of the equipment.) (To record current depreciation.) (To record exchange of the equipment.) Question Attempts: 0 of 3 usedExplanation / Answer
Please give your feedback and mark rating if Solution has as per your expectation Journal Entry ( Assuming Exchange has Commercial Substance W/Note-1 Calculation of Depreciation Date Account & Explanation Debit Credit Cost of Old Meter $16,352.00 a. Exchange has Commercial Substance Less: Salvage Value $1,022.00 Depreciation Expense (W/Note-1) $1,022.00 Net Cost of Meter $15,330.00 Accumulated Depreciation- Melter $2,022.00 Life 5Year (To Record Depreciation) Depreciation per Year $3,066.00 Depreciation for 4 Month $1,022.00 Melter - New (W/Note-3) $22,192.00 ( $3066*4/12) Accumulated Depreciation $10,220.00 Melter - old $16,352.00 W/Note-2: Computation of Gain on Disposal of Plant Cash $14,600.00 Cost of Old Asset $16,352.00 Gain on Disposal of Plant (W/Note-2) $1,460.00 Less: Accumulated Depreciation ($9198+$1022) $10,220.00 (To Record Exchange Equipment) Book Value (b) $6,132.00 Fair Market Value of Old Asset (a) $7,592.00 b. Exchange Lacks Commercial Substance Gain on old Asset (a-b) $1,460.00 Depreciation Expense (W/Note-1) $1,022.00 Accumulated Depreciation- Melter $1,022.00 W/Note-3 Computation of Cost of New Melter (To Record Depreciation) Cash Paid $14,600.00 FMV of Old Melter $7,592.00 Melter- New Melter $20,732.00 Total Value of New Melter $22,192.00 Accumulated Depreciation $10,220.00 Melter - old $16,352.00 Cash $14,600.00 (To Record Exchange Equipment)
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