Presented below are two independent transactions. Both transactions have commercial substance.
- Mercy Co. exchanged old trucks (cost $64,000 less $22,000 accumulated depreciation) plus cash of $17,000 for new trucks. The old trucks had a fair value of $38,000.
- Pence Inc. trades its used machine (cost $12,000 less $4,000 accumulated depreciation) for a new machine. In addition to exchanging the old machine (which had a fair value of $11,000), Pence also paid cash of $3,000.
Instructions
(a)Prepare the entry to record the exchange of assets by Mercy Co.
(b)Prepare the entry to record the exchange of assets by Pence Inc.