Webb Net Manufacturing purchased a new net weaving machine on January 1, 2009, for $500,000. The new machine has an estimated life of five years and an estimated salvage value of $100,000. It is company policy to use straight-line depreciation for all of its machines.
REQUIRED:
a. Assume that Webb Net Manufacturing sells this machine on January 1, 2012, for $325,000. Prepare the entry to record this transaction.
b. Assume that Webb Net Manufacturing sells this machine on June 30, 2012, for $320,000. Prepare the entry or entries to record this transaction.
c. Assume that Webb Net Manufacturing trades in this machine for a tract of land on January 1, 2012. The list price of the land is $250,000, and it has an appraised value of $210,000. The company is granted a trade-in allowance on the machine of $75,000 and pays an additional $175,000 in cash for the land. The net weaving machine is appraised at $75,000. Prepare the entry to record the trade-in, assuming that the land is valued as follows:
(1) The FMV of the asset received.
(2) The FMV of the assets given up.