Water Drops Company Purchased Equipment for $200,000

question 105

Essay

Water Drops Company purchased equipment for $200,000. The company recorded total depreciation of $140,000 on the equipment. On January 1, 2015, the company traded in the equipment for new equipment, paying $150,000 cash. The fair market value of the new equipment is $250,000. Journalize Water Drop Company's exchange of equipment. Assume the exchange had commercial substance.

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Definitions:

Wholesaler

A type of intermediary in the distribution channel that purchases goods in large quantities from manufacturers or importers and sells them to retailers or other businesses.

Conforming Goods

Merchandise or products that meet the specifications and standards outlined in a purchase contract.

Acceptance

A promise or act on the part of an offeree indicating a willingness to be bound by the terms and conditions contained in an offer. Also, the acknowledgment of the drawee that binds the drawee to the terms of a draft.

Purchase Order

A document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.