A Company Exchanges an Old Machine for a New Machine

question 121

Multiple Choice

A company exchanges an old machine for a new machine and cash is paid for the new machine.Assume there is a Gain on Exchange of Machine.In the journal entry to record the exchange by the owner of the old machine,what accounts will the accountant debit?

• A)Machine and Accumulated Depreciation
• B)Cash and Machine
• C)Accumulated Depreciation,Cash and Machine
• D)Accumulated Depreciation,Cash,Machine and Gain on Exchange of Machine

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Definitions:

Investment Purposes

The intent to allocate resources or capital towards assets anticipated to generate income or profit.

Inheritance

Assets received from someone who has passed away, often subject to specific laws and taxes.

Fair Market Value

The price at which an asset would sell in the marketplace between a willing buyer and seller, each having reasonable knowledge of all relevant facts.

Long-Term Gain

Profit from the sale of an asset held for more than a specific period, typically one year, qualifying for preferential tax treatment.