Problem - Montgomery Company purchased an electric wax melter on April 30, 2011, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
List price of new melter $15,800
Cash paid 10,000
Cost of old melter (5-year life, $700 residual value) 12,700
Accumulated depreciation-old melter (straight-line) 7,200
Second-hand market value of old melter 5,200
Prepare the journal entry(ies) necessary to record this exchange, assuming that the melters exchanged are (a) has commercial substance, and (b) lacks commercial substance. Montgomery's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2010.