A machine cost $1248000, has annual depreciation of $208000, and has accumulated depreciation of $988000 on...

A machine cost $1248000, has annual depreciation of $208000, and has accumulated depreciation of $988000 on December 31, 2020. On April 1, 2021, when the machine has a fair value of $286000, it is exchanged for a machine with a fair value of $1404000 and the proper amount of cash is paid. The exchange had commercial substance.

The gain to be recorded on the exchange is

$78000

$0

$156000

$52000

Expert Solution


Cost	$ 12,48,000.00
Accumulated depn	$ 9,88,000.00
Book value on 31.12.2020	$ 2,60,000.00
Depn for Jan-mar'21	$ 52,000.00	($208,000/12*3)
Book value on 01.04.2021	$ 2,08,000.00

Journal Entry
Accounts & Explaination	Debit	Credit
Depreciation	$ 52,000.00
Accumuated Depreaciation-Machine		$ 52,000.00
(To record depreciation)

Machinery(New)	$ 14,04,000.00
Machinery(Old)		$ 2,08,000.00
Cash		$ 11,18,000.00	($1404000-286000)
Gain on exchange of machine		$ 78,000.00	($286000-208000)
(To record exchange of asset)

ekkarill92 answered 3 years ago

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