Question

Bridgeport Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $10,080 plus trade-in, f.o.b. factory. Bridgeport Inc. paid $10,080 cash and traded in used equipment. The

asked Jul 19, 2021 167k views

Bridgeport Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $10,080 plus trade-in, f.o.b. factory. Bridgeport Inc. paid $10,080 cash and traded in used equipment. The used equipment had originally cost $78,120; it had a book value of $52,920 and a secondhand fair value of $60,228, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,386.

Required:
a. Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance.
b. Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable. Prepare the general journal entry to record this transaction.

Hakany asked

by Hakany

4.1k points

1 Answer

Ask a Question

Milche Patern · Answer 1 · 2021-07-24T17:11:53+0000

Answer:

a. Price = $10,080

Cash = $10,080

Original Cost = $78,120

Book Value= $52,920

Second hand Market Value = $60,228

Freight and installation charges = $1,386

Total Cost of Equipment = Cash + Second hand Market Value + Freight and installation charges = $10,080 + $60,228 + $1,386 = $71,694

Depreciation = Original Cost - Book value = $78,120 - $52,920 = $25,200

Total cash paid = Cash + Freight and installation charges = $10,080 + $1,386 = $11,466

Journal Entries

Item Debit Credit

New Equipment $71,694

Depreciation $25,200

Old Equipment $78,120

Cash $11,466

Gain on Equipment Disposal $7,308

b. Price = $10,080