Cannondale Company purchased an electric wax melter on April 30, 2014, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
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List price of new melter
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$26,544
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Cash paid
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16,800
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Cost of old melter (5-year life, $1,176 salvage value)
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18,816
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Accumulated Depreciation-old melter (straight-line)
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10,584
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Secondhand fair value of old melter
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8,736
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Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Cannondale's year ends on December 31, and depreciation has been recorded through December 31, 2013
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No.
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Account Titles and Explanation
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Debit
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Credit
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(a)
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Exchange has commercial substance:
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 Depreciation Expense
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1176
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Accumulated Depreciation-Equipment
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1176
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(To record current depreciation.)
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Equipment
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25536
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Accumulated Depreciation-Equipment
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11760
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Cash
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16800
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Equipment
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18816
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Gain on Disposal of Equipment
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1680
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(To record exchange of the machine.)
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(b)
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Exchange lacks commercial substance:
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Depreciation Expense
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1176
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Accumulated Depreciation-Equipment
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1176
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(To record current depreciation.)
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Equipment
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??
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Accumulated Depreciation-Equipment
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11760
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Gain on Disposal of Equipment
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??
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Equipment
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18816
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Cash
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16800
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(To record exchange of the machine.)
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