When a Company Exchanges Machinery and Receives a Trade-In Allowance

Multiple Choice

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance) :

A) debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Disposal
B) debit Machinery and Accumulated Depreciation; credit Machinery and Cash
C) debit Cash and Machinery; credit Accumulated Depreciation
D) debit Cash and Machinery; credit Accumulated Depreciation and Machinery