申論題

五、L'oreal Company purchased machinery for $1,500,000 on July 1, 2015. It is estimated that it will have a useful life of 5 years, and zero residual value. The sum-of-the-years’-digits method of depreciation is being used. On June 30, 2017, L'oreal Company exchanged the machine plus $100,000 in cash for an equipment used in the operations of Scotch Company. The fair value of L'oreal’s used machine is $550,000. Assume that depreciation expense on the machinery has been recorded up to the date of the exchange. 

(b) Prepare the journal entries on the book of L'oreal Company. Assume that the exchange has commercial substance. (5%)