I need to know how to work this problem in Accountin?

Question

Machinery acquired at a cost of $100,000 and on which there is accumulated depreciation of $60,000 (including depreciation for the current year to date) is exchanged for similar machinery. For financial reporting purposes, present entries to record the disposition of the old machinery and the acquisition of new machinery under each of the following assumptions:
A- price of new, $120,000; trade-in allowance on old,$4,000; balance paid in cash.
B- price of new,$120,000; trade-in allowance on old, $44,000; balance paid in cash.

I need to know how to work the problem. Thanks

Answer 1

I take it this is a straight off gain/loss on disposal question and you're not studying exchanges of non-monetary assets?

A- price of new, $120,000; trade-in allowance on old,$4,000; balance paid in cash.
Dr Accumulated depreciation 60,000
Dr Machinery (new) 120,000
Dr Loss on disposal of machinery 36,000
Cr Machinery(old) 100,000
Cr Cash 116,000

B- price of new,$120,000; trade-in allowance on old, $44,000; balance paid in cash.
Dr Accumulated depreciation 60,000
Dr Machinery (new) 120,000
Cr Gain on disposal of machinery 4,000
Cr Machinery(old) 100,000
Cr Cash 76,000

Answer 2

A. loss of 36,000.
dr. new machenery 120,000.
dr. accumulated dep. old mach. 60,000.
dr. loss on disposal of machinery 36.000.
cr. old machinery 100,000.
cr. cash 116,000.

B. gains or exchanges of similar fixed assets are NOT recognized for financial reporting purposes.
When the trade-in allowance exceeds the book value of an asset traded in and no gain is recognized, the cost recorded for the new asset can be determined in either of two ways:

method one:
list price of new equip. 120,000.
trade-in allowance 44,000.
book value of old equip. 40,000.
unrecognized gain on exchange 4,000.
cost of new equip. 120,000. - 4,000. = 116,000.

method two:
book value of old equip 40,000.
cash paid date of exchange 76,000.
40,000. + 76,000. = 116,000.

The entry to record the exchange would be as follows:
dr. accumulated depreciation old equip. 60,000.
dr. new equip. 116,000.
cr. old equip. 100,000.
cr. cash 76,000.

good luck