When a Company Exchanges Machinery and Receives a Trade-In Allowance

question 105

Multiple Choice

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with which of the following entries (assuming the exchange was considered to have commercial substance) ?

• A) debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Exchange of Machinery
• B) debit Machinery and Accumulated Depreciation; credit Machinery and Cash
• C) debit Cash and Machinery; credit Accumulated Depreciation
• D) debit Cash and Machinery; credit Accumulated Depreciation and Machinery