Exercise 10-18 - 10-33 EXERCISE 10-18 (Continued) (b)...

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EXERCISE 10-18 (20–25 minutes) (a) Exchange has commercial substance: Depreciation Expense . ............................................... 700 Accumulated Depreciation—Melter . ........... 700 ($11,200 – $700 = $10,500; $10,500 ÷ 5 = $2,100; $2,100 X 4/12 = $700) Melter . .............................................................................. 15,200** Accumulated Depreciation—Melter. ...................... 7,000 Gain on Disposal of Plant Assets. ............... 1,000* Melter. .................................................................... 11,200 Cash. ...................................................................... 10,000 *Cost of old asset $11,200 Accumulated depreciation ($6,300 + $700) (7,000) Book value 4,200 Fair market value of old asset (5,200) Gain (on disposal of plant asset) $ 1,000 **Cash paid $10,000 Fair market value of old melter 5,200 Cost of new melter $15,200
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Unformatted text preview: 10-33 EXERCISE 10-18 (Continued) (b) Exchange lacks commercial substance: Depreciation Expense. ................................................ 700 Accumulated DepreciationMelter. ............ 700 Melter. ............................................................................... 15,200** Accumulated DepreciationMelter. ....................... 7,000 Gain on Disposal of Plant Assets. ................ 1,000 Melter . .................................................................... 11,200 Cash . ...................................................................... 10,000 **Cash paid $10,000 Fair market value of old asset 5,200 Cost of new asset $15,200 Note that the entries are the same for both (a) and (b). Gain is not deferred because cash boot is greater than 25%, which makes the transaction monetary in nature. 10-34...
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Exercise 10-18 - 10-33 EXERCISE 10-18 (Continued) (b)...

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