Question

On January 1, 2017, Frostburg Company purchased for $68,500, equipment having a service life of six years and an estimated residual value of $4,000. Frostburg has recorded depreciation of the equipment using the straight-line method. On December 31, 2019, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $35,000. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2019.

Answer 1

Answer:

Explanation:

Cost =   68500

Date = January 1, 2017

December 31, 2019

Cost  =                                   68500

Acc. Depreiciation         =   -34,250       (68500/6)*3  

book Value                      =    34,250

Exchanged asset cost    =     35000

Trade in gain                   =      750

Accounting Entries

Asset                                     35000

Accumulated depriciation  34250  

                     Asset                                    68500

                     Gain on Exchange                  750