Presented Below Are Two Independent Situations

question 225

Essay

Presented below are two independent situations:
(a) Waner Company exchanged an old machine (cost $100,000 less $60,000 accumulated depreciation) plus $5,000 cash for a new machine. The old machine had a fair value of $36,000. Prepare the entry to record the exchange of assets by Waner Company.

(b) Fisher Company trades old equipment (cost $90,000 less $54,000 accumulated depreciation) for new equipment. Fisher paid $36,000 cash in the trade. The old equipment that was traded had a fair value of $44,000. Prepare the entry to record the exchange of assets by Fisher Company. The transaction has commercial substance.

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Definitions:

Economic Model

A theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them.

Simplified

Made easier to understand or do; reduced in complexity.

Reality

The state of things as they actually exist, as opposed to how they may appear or may be thought to be.

Invisible Hand

A metaphor introduced by Adam Smith to describe how individuals pursuing their own interests unintentionally benefit society as a whole.