Below is the information relative to an exchange of old equipment for new equipment by Ehrlich Company. Old Equipment Book Value Fair Value Cash Paid $450,000 $510,000 $90,000 The old equipment had a cost to Ehrlich of $600,000. Show your calculations of the gain or loss incurred on the exchange.
Below is the information relative to an exchange of old equipment for new equipment by Ehrlich Company. Old Equipment Book Value Fair Value Cash Paid $450,000 $510,000 $90,000 The old equipment had a cost to Ehrlich of $600,000. Show your calculations of the gain or loss incurred on the exchange.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Below is the information relative to an exchange of old equipment for new equipment by Ehrlich Company.
|
Old Equipment |
|
|
|
Book Value |
Fair Value |
Cash Paid |
|
$450,000 |
$510,000 |
$90,000 |
The old equipment had a cost to Ehrlich of $600,000. Show your calculations of the gain or loss incurred on the exchange.
1. Prepare the
2 Prepare the journal entry for Ehrlich to record the exchange of the equipment assuming the exchange has commercial substance.
3. Assume instead that the machine was sold for cash on 1/1 for $430,000. Prepare the necessary journal entry.
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