Question

Metlock Corporation wishes to exchange a machine used in its operations. Metlock has received the following offers from other companies in the industry.

1.		Bonita Company offered to exchange a similar machine plus $25,300. (The exchange has commercial substance for both parties.)
2.		Windsor Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
3.		Sheridan Company offered to exchange a similar machine, but wanted $3,300 in addition to Metlock’s machine. (The exchange has commercial substance for both parties.)

In addition, Metlock contacted Skysong Corporation, a dealer in machines. To obtain a new machine, Metlock must pay $102,300 in addition to trading in its old machine.

		Metlock		Bonita		Windsor		Sheridan		Skysong
Machine cost		$176,000		$132,000		$167,200		$176,000		$143,000
Accumulated depreciation		66,000		49,500		78,100		82,500		–0–
Fair value		101,200		75,900		101,200		104,500		203,500

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (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 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.	Metlock Corporation
	Bonita Company
2.	Metlock Corporation
	Windsor Company
3.	Metlock Corporation
	Sheridan Company
4.	Metlock Corporation
	Skysong Company
	(To record exchange of inventory)
	(To record cost of inventory)

Answer 1

SOLUTION:

1)

NO	ACCOUNTS TITLE	DEBIT	CREDIT
1	METLOCK CORPORATION
	MACHINERY	$ 75900
	CASH	$ 25300
	ACCUMULATED DEPRECIATION	$ 66000
	LOSS ON DISPOSAL OF MACHINE	$8800
	TO MACHINERY		$ 176000
	(TO RECORD EXCHANGE OF INVENTORY AND ADDITIONAL CASH RECEIVED)
	BONITA COMPANY
	MACHINERY	$101200
	ACCUMULATED DEPRECIATION	$49500
	LOSS ON DISPOSAL OF MACHINE	$6600
	TO MACHINERY		$132000
	TO CASH		$25300
	(TO RECORD EXCHANGE OF INVENTORY AND ADDITIONAL CASH PAID)

2)

NO	ACCOUNTS TITLE	DEBIT	CREDIT
2	METLOCK CORPORATION
	MACHINERY	$101200
	ACCUMULATED DEPRECIATION	$66000
	LOSS ON DISPOSAL OF MACHINE	$8800
	TO MACHINERY		$176000
	(TO RECORD EXCHANGE OF MACHINERY)
	WINDSOR COMPANY
	MACHINERY	$101200
	ACCUMULATED DEPRECIATION	$78100
	TO MACHINERY		$167200
	TO CASH		$12100
	(TO RECORD EXCHANGE OF MACHINERY AND ADDITIONAL CASH PAID)

3)

NO	ACCOUNTS TITLE	DEBIT	CREDIT
3	METLOCK CORPORATION
	MACHINERY	$104500
	ACCUMULATED DEPRECIATION	$66000
	LOSS ON DISPOSAL OF MACHINE	$8800
	TO MACHINERY		$176000
	TO CASH		$3300
	(TO RECORD EXCHANGE OF MACHINERY AND ADDITIONAL CASH PAID)
	SHERIDAN COMPANY
	MACHINERY	$101200
	CASH	$3300
	ACCUMULATED DEPRECIATION	$82500
	TO GAIN ON DISPOSAL OF MACHINE		$11000
	TO MACHINERY		$176000
	(TO RECORD EXCHANGE OF INVENTORY AND ADDITIONAL CASH RECEIVED)

4)

NO	ACCOUNTS TITLE	DEBIT	CREDIT
4	METLOCK CORPORATION
	MACHINERY	$203500
	ACCUMULATED DEPRECIATION	$66000
	LOSS ON DISPOSAL OF MACHINE	$8800
	TO MACHINERY		$176000
	TO CASH		$102300
	(TO RECORD PURCHASE OF MACHINERY ALONGWITH EXCHANGE OF OLD MACHINE)
	SKYSONG COMPANY
	CASH	$102300
	INVENTARY	$101200
	TO SALES REVENUE		$203500
	(TO RECORD EXCHANGE OF INVENTORY)
	COST OF GOODS SOLD	$143000
	TO INVENTORY		$143000
	(TO RECORD COST OF INVENTORY)

THANKYOU!!