Seaver Inc

question 43

Essay

Seaver Inc. exchanged a machine costing $400,000 with accumulated depreciation of $280,000 for a machine from the Goodin Company. Goodin paid $20,800 cash in addition to its machine (which cost $200,000 with accumulated depreciation of $68,000) for the Seaver machine. The Goodin machine has a fair value of $160,000.
Provide the necessary entries to record the transactions on both companies' books assuming the machine lacks commercial substance.

---

Definitions:

Net Cash Flows

The difference between a company's cash inflows and outflows in a given period, indicative of its financial health.

Capital Budgeting

The process of evaluating and selecting long-term investments consistent with the firm's goal of wealth maximization.

Net Cash Flows

The difference between cash inflows and outflows during a specific period, reflecting the company's financial health.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculating the discount rate at which the net present value of costs and benefits of an investment equals zero.