Problem:
The XYZ corporation has negotiated the purchase of a new piece of equipment at $8,000 plus trade in , f.o.b. factory. The XYZ corporation paid $8,000 cash and traded in used equipment. The used equipment originally cost $62,000; it had a book value of $42,000 and a second hand market value of $47,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100.
A . Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance.
B. Assume the same facts as in [A] except that the fair value information for the assets exchanged is not determinable. Prepare a general journal entry to record this transaction.