E10-17B (Nonmonetary Exchange) Phillips Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department.

E10-17B (Nonmonetary Exchange) Phillips Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Phillips Corporation gave the machine plus $680 to Luzinski Business Machine Company (dealer) in exchange for a new machine. This transaction has commercial substance. Assume the following information about the machines.

                                        Phillips Corp.                   Luzinski Co.

                                      (Old Machine)                 (New Machine)

Machine cost                       $580                                  $540

Accumulated depreciation    280                                     –0–

Fair value                             170                                       850

Instructions

For each company, prepare the necessary journal entry to record the exchange.