Question - The transactions listed below occurred at Murphy Company during 2016: Mar. 25 Exchanged a printer (Office Equipment) that had an original cost of $5,050 when purchased on January 4, 2014. The useful life of the old asset was originally estimated at four years and the salvage value at $250. The new printer had a price and market value of $10,400. Murphy gave up the old machine and paid $5,200 cash. The new printer is estimated to have a useful life of five years and a salvage value of $650.
July 19 Exchanged a truck (Vehicles) for a new one that had a sales price, and fair value, of $43,800. Received a trade-in allowance of $11,000 on the old truck and paid cash of $32,800. The old truck had been purchased for $36,060 on May 27, 2013, three years earlier.
The life of the old truck was originally estimated at four years and the salvage value at $6,300. The life of the new truck is estimated to be five years and it is estimated to have a salvage value of $9,300.
Aug. 18 Sold a truck that was purchased on January 5, 2014, for $43,020. It had an estimated life of four years and an estimated salvage value of $7,500. Sales price is as indicated in Instructions, below.
Note: In following these instructions, assume that straight-line depreciation is used and that depreciation was last recorded on December 31, 2015.
1. Prepare the journal entries to record the two exchange transactions.
2. Record the journal entries for the truck sold on August 18, 2016.