(Nonmonetary Exchange) Montgomery Company purchased an electric wax melter on April 30, 2013, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
|
List price of new melter |
$15,800 |
|
Cash paid |
10,000 |
|
Cost of old melter (5 year life, $700 residual value) |
12,700 |
|
Accumulated depreciation—old melter (straight line) |
7,200 |
|
Secondhand fair value of old melter |
5,200 |
Instructions
Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Montgomery’s year ends on December 31, and depreciation has been recorded through December 31, 2012.