Answer:
Cost of the new machine:
= Price of new machine - Trade allowance + Market value of old machine
= $16,000 - $9,000 + $6,000
= $13,000
Consequently, the journal entry would be recorded as follows:
New Machine Cost A/c Dr. $13,000
Accumulated Depreciation (Book Value) A/c Dr. $4,000
Loss from machine exchange A/c Dr. $2,000
To Old Machine (Book Value) $12,000
To Cash (16,000 - 9,000) $7,000
(To document the equipment exchange)
Answer:
By making decisions based on marginal analysis, I can guarantee that every set of inserts produced yields a profit. If profit margins for any insert pair fall below zero, I will need to reduce production. Grasping these margins will also keep me ahead in a market with potential competitors. In case more producers join the market, I can readily adjust prices downwards or provide discounts while still ensuring profit maximization.
Explanation:
