Cedric Company recently traded in an older model computer for a new model. The old model's book value was $180,000 (original cost of $400,000 less $220,000 in accumulated depreciation) and its fair value was $200,000. Cedric paid $60,000 to complete the exchange which has commercial substance.
Required:
1) Prepare the journal entry to record the exchange.
2) Assume that the fair value of the old equipment is $170,000. Prepare the journal entry to record the exchange.
3) Assume that the exchange does not have commercial substance. Prepare the journal entry to record the exchange (assume original $200,000 fair value of the old equipment).