When a company exchanges machinery and receives a trade-in allowance greater tha

Question

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance): a. debit Cash and Machinery; credit Accumulated Depreciation and Machinery b. debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Disposal c. debit Cash and Machinery; credit Accumulated Depreciation d. debit Machinery and Accumulated Depreciation; credit Machinery and Cash

Explanation / Answer

b. debit machinery and accumulated depreciation; credit machinery, cash, and gain on disposal

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