Exercise NO: 20

Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook

Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook Inc. paid $8,000 cash and traded in used equipment. The used equipment had originally cost $62,000; it had a book value of $42,000 and a secondhand fair value of $47,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100.

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Instructions

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(a) Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance.

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(b) Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable, prepare the general journal entry to record this transaction.

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Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first

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