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

---

Definitions:

Factor Demand

The demand for productive resources (like labor, land, and capital) that businesses need to produce goods and services.

Marginal Product

The extra output produced by using an additional unit of a particular production factor, while holding other factors steady.

Candy Bars

Confectionery items that consist of chocolate and other sweet ingredients, often with a filling or coating.

VMPL

The value of the marginal product of labor, which denotes the additional value generated by employing one more worker.