How to prepare for ASSET?

Can I have help with recording plant asset disposals?

• On January 5, 2011, Holstrom Co. disposes of a machine costing $65,500 with accumulated depreciation of $35,284. Prepare the entries to record the disposal under each of the following separate assumptions. 1. The machine is sold for $25,343 cash 2. The machine is traded in for a newer machine having an $86,125 cash price. A $31,912 trade in allowance is received and the balance is paid in cash. Assume the asset exchange lacks commercial substance. 3. The machine is traded in for a newer machine having an $86,125 cash price.A $23,393 trade in allowance is received and the balance is paid in cash. Assume the asset exchange has commercial substance.

• Answer:

  Note: Cost of old machinery 65500 Depreciation 35284 Book value 30216 1. The machine is sold for $25,343 cash Dr Cash 25,343 Dr Loss 4,873 Credit Machinery 30, 216 2. The machine is traded in for a newer machine having an $86,125 cash price. A $31,912 trade in allowance is received and the balance is paid in cash. Assume the asset exchange lacks commercial substance. Dr Machinery(New) 54,213 (86,125-31,912 = 54,213) Cr Machinery(Old) 30,216 (Book Value) Cr Cash 23,997 3. The machine is traded in for a newer machine having an $86,125 cash price.A $23,393 trade in allowance is received and the balance is paid in cash. Assume the asset exchange has commercial substance. -In my view, as far as the purchaser company is concerned, the entries will be similar to at (1) above. .