On April 1 of the Current Year, a Company Traded

Essay

On April 1 of the current year, a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000.
1. Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash. Assume the exchange transaction had commercial substance.
2. Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance, a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash. Assume the exchange transaction has commercial substance.