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

question 39

Multiple Choice

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry:

• A) debit Machinery and Accumulated Depreciation; credit Machinery and Cash
• B) debit Cash and Machinery; credit Accumulated Depreciation
• C) debit Cash and Machinery; credit Accumulated Depreciation and Machinery
• D) debit Machinery, Accumulated Depreciation, and Loss on Disposal; credit Machinery and Cash

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Definitions:

Specialization

The process by which individuals, businesses, or countries focus on producing a narrow range of products or services to gain greater efficiencies.

Production Possibility Frontier

A curve depicting the maximum feasible combinations of two products that a society can produce with existing resources and technology.

Trade

The act of buying, selling, or exchanging goods and services between people, firms, or countries.

Trade

The exchange of goods and services between people or entities, often in the context of international markets.