Metlock Inc. has negotiated the purchase of a new piece of automatic equipment a
ID: 2413132 • Letter: M
Question
Metlock Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $10,080 plus trade-in, f.o.b. factory. Metlock Inc. paid $10,080 cash and traded in used equipment. The used equipment had originally cost $78,120; it had a book value of $52,920 and a secondhand fair value of $60,228, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,386.
Account Titles and Explanation
Debit
Credit
Account Titles and Explanation
Debit
Credit
Metlock Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $10,080 plus trade-in, f.o.b. factory. Metlock Inc. paid $10,080 cash and traded in used equipment. The used equipment had originally cost $78,120; it had a book value of $52,920 and a secondhand fair value of $60,228, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,386.
Explanation / Answer
SOLUTION
S.No. Account titles and Explanation Debit ($) Credit ($) 1. Equipment ($60,228 + $10,080 + $1,386) 71,694 Accumulated Depreciation ($78,120 - $52,920) 25,200 Equipment 78,120 Cash ($10,080 + $1,386) 11,466 Gain on disposal 7,308 2. Equipment 64,386 Accumulated Depreciation 25,200 Equipment 78,120 Cash 11,466