QUESTION 1 - Flounder Company traded a used welding machine (cost $12,420, accumulated depreciation $4,140) for office equipment with an estimated fair value of $6,900. Flounder also paid $4,140 cash in the transaction.
Prepare the journal entry to record the exchange.
QUESTION 2 - Stellar Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below.
1. Truck #1 has a list price of $36,750 and is acquired for a cash payment of $34,055.
2. Truck #2 has a list price of $39,200 and is acquired for a down payment of $4,900 cash and a zero-interest-bearing note with a face amount of $34,300. The note is due April 1, 2018. Stellar would normally have to pay interest at a rate of 9% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
3. Truck #3 has a list price of $39,200. It is acquired in exchange for a computer system that Stellar carries in inventory. The computer system cost $29,400 and is normally sold by Stellar for $37,240. Stellar uses a perpetual inventory system.
4. Truck #4 has a list price of $34,300. It is acquired in exchange for 1,070 shares of common stock in Stellar Corporation. The stock has a par value per share of $10 and a market price of $13 per share.
Prepare the appropriate journal entries for the above transactions for Stellar Corporation.