XYZ company purchased a piece of machinery by exchanging one of their used pieces of...
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Accounting
XYZ company purchased a piece of machinery by exchanging one of their used pieces of equipment plus cash for a new machine. The used machine had a cost of $100,000 and accumulated depreciation of $50,000 and a fair value of $45,000. The list price of the new machine is $75,000, but the seller gives XYZ a trade in allowance for the used machine of $55,000.
a) Prepare the journal entry to record the purchase and be prepared to explain how you calculated the cost of the machine on XYZ's books. Assume the exchange has commercial substance.
b) How would the recording differ if the two machines do not produce significantly different cash flows for XYZ?
c) How would the recording differ if the two machines do not produce significantly different cash flows for XYZ and the transaction had produced a gain and not a loss?
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