Question

Pina Corporation traded a used truck (cost $25,200, accumulated depreciation $22,680) for a small computer with a fair value of $4,158. Pina also paid $630 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

Answer 1

Answer:

Calculation of Gain or Loss:

Book Value of Truck = 25,200 - 22,680

                                  = $2,520

Gain on Exchange = 4,158 - 2,520 - 630

                               = $1,008

Therefore, the journal entry is as follows:

Accumulated Depreciation A/c Dr. $22,680

computer A/c                              Dr. $3,150

              To Truck                                            $25,200

              To Cash                                              $630

(To record the Truck)