On January 1, 2020, EA Co. bought a new machine. The total original cost of the machine is $255,000. On December 31, 2020, EA Co. wants to disposal the old machine. This old machine had an estimated life of 5 years (straight-line depreciation) and a salvage value of $15,000. The old machine is exchanged for a new machine with a fair value of $142,000. The exchange lacked commercial substance. EA Co. also have to pay $18,000 cash. Please show the gain recognition process from the exchange and prepare the entry for the exchange.

On January 1, 2020, EA Co. bought a new machine. The total original cost of the machine is $255,000. On December 31, 2020, EA Co. wants to disposal the old machine. This old machine had an estimated life of 5 years (straight-line depreciation) and a salvage value of $15,000. The old machine is exchanged for a new machine with a fair value of $142,000. The exchange lacked commercial substance. EA Co. also have to pay $18,000 cash. Please show the gain recognition process from the exchange and prepare the entry for the exchange.

Name: 2. On January 1, 2020, EA Co. bought a new machine. The total origina
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Description: 2. On January 1, 2020, EA Co. bought a new machine. The total original cost of the machineis $255,000. On December 31, 2020, EA Co. wants to disposal the old machine. This oldmachine had an estimated life of 5 years (straight-line depreciation) and

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 10MC

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