9) Blueribbon Gallery reported the following assets on its December 31, 2019 balance sheet:
Dec. 31, 2018 Dec. 31, 2019
Cash $35,000 $28,000
Accounts Receivable 97,000 85,000
Merchandise Inventory 80,000 62,000
Prepaid Expenses 29,000 20,000
Property, plant, and equipment, net 30,000 18,000
If the net sales for the year amounted to $850,000, what is the asset turnover ratio for 2019?
1) An exchange of plant assets has commercial substance if the future cash flows change as a result of the
transaction.
2) Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to
be recognized.
3) For exchanges of plant assets with commercial substance, the new asset received will be recorded at its
market value.
4) Brooklyn Market recently traded in store fixtures. The exchange had commercial substance. The old
fixtures had a cost of $70,000 and accumulated depreciation of $58,000. Brooklyn paid $99,000 for the
new store fixtures. These new fixtures had a market value of $133,000. There is a loss of $22,000 on this
exchange.
5) Equipment was acquired for $208,000 and has accumulated depreciation of $85,000. The business
exchanges this equipment for new equipment. The new equipment has a market value of $307,000 and
the business pays $56,000 cash. Assume the exchange has commercial substance. The exchange results in
a ________.
A) loss of $128,000
B) gain of $184,000
C) gain of $128,000
D) loss of $184,000
6) Dew Drops, Inc. purchased equipment for $200,000. The company recorded total depreciation of
$140,000. On January 1, 2018, the company exchanges the equipment for new equipment, paying $150,000
cash. The fair market value of the new equipment is $250,000. Prepare the journal entry to record this
transaction. Assume the exchange has commercial substance. Omit explanation.
7) Annie, Inc. purchased a computer for $5,000. During 2018 and 2019, the company recorded total
depreciation of $4,000 on the computer. On January 1, 2020, the company exchanges the computer for a
new one, paying $4,000 cash. The market value of the new computer is $6,000. Prepare the journal entry
to record this transaction. Assume the exchange has commercial substance. Omit explanation.
8) Wash N‘ Dry Corp. purchased equipment for $45,000. Total depreciation of $36,000 was recorded. On
January 1, 2017, Wash N’ Dry exchanges the equipment for new equipment, paying $54,000 cash. The
market value of the new equipment is $65,000. Prepare the journal entry to record this transaction.
Assume the exchange has commercial substance. Omit explanation.
9) City Auto Parts recently traded in store fixtures. The exchange had commercial substance. The old
fixtures had a cost of $48,000 and accumulated depreciation of $14,000. City paid $101,000 for the new
store fixtures. These new fixtures had a market value of $117,000. There is a loss of $18,000 on this
exchange.
10) A machine that was purchased for $120,000 has accumulated depreciation of $90,000. The business
exchanges the machine for a new one. The new machine has a market value of $130,000, and the business
pays $120,000 cash. Assume the exchange has commercial substance. This exchange results in a ________.
A) gain of $20,000
B) gain of $10,000
C) loss of $20,000
D) loss of $30,000
11) Equipment was acquired for $258,000 and has accumulated depreciation of $188,000. The business
exchanges this equipment for new equipment. The new equipment has a market value of $206,000 and
the business pays $150,000 cash. Assume the exchange has commercial substance. The exchange results
in a ________.
A) loss of $14,000
B) gain of $14,000
C) gain of $136,000
D) loss of $136,000
12) A truck was acquired for $100,000 and has accumulated depreciation of $70,000. The business
exchanges the truck for a new one. The new truck has a market value of $120,000 and the business pays
$100,000 cash. Assume the exchange has commercial substance. Prepare the journal entry to record this
transaction. Omit explanation.
13) Work Room Corp. purchased equipment for $45,000. Total depreciation of $36,000 was recorded. On
January 1, 2019, Work Room exchanged the equipment for new equipment, paying $65,000 cash. The
market value of the new equipment is $65,000. Prepare the journal entry to record this transaction.
Assume the exchange had commercial substance. Omit explanation.
14) Journey Corp. purchased equipment for $45,000. Total depreciation of $36,000 was recorded. On
January 1, 2017, Journey exchanged the equipment for new equipment, paying $56,000 cash. The market
value of the new equipment is $65,000. Prepare the journal entry to record this transaction. Assume the
exchange has commercial substance. Omit explanation.