BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for trade of fixed asset

On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $75,000. Bentley Delivery received a trade-in allowance (fair market value) of $24,000 on an old truck of similar type and paid cash of $51,000. The following information about the old truck is obtained from the account in the equipment ledger: cost, $56,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $35,000; annual depreciation, $7,000. Assuming that the exchange has commercial substance, journalize the entries to record (a) the current depreciation of the old truck to the date of trade-in and (b) the transaction on October 1.

(a)

To determine

Exchange of fixed assets: It refers to the purchase of new fixed assets in exchange of old fixed assets.

Commercial substance: It means that the exchange of the fixed asset cause changes in the future cash flows as more revenue will generate from the new fixed asset due to an increase in its productivity. Thus, if the revenue earned or expenses incurred changes in the future due to the exchange of fixed assets, then it will be referred as the exchange has a commercial substance.

To journalize: the current depreciation of the old truck to the date of trade-in.

Explanation

Record the journal entry for current depreciation of the old truck to the date of trade-in.

Date Accounts title and explanation Post Ref.

Debit

($)

Credit

($)

October 1 Depreciation Expense-Trucks              (1) 5,250
Accumulated depreciation – Trucks 5,250
(To record the current depreciation expense.)

Table (1)

Working note:

Compute the current year depreciation on the date of exchange...

(b)

To determine

To journalize: the exchange transaction on October 1.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the major elements of Herzbergs motivationhygiene theory?

Foundations of Business (MindTap Course List)

What are the three major parts of a T account?

College Accounting, Chapters 1-27

What is inflation and what causes it?

Essentials of Economics (MindTap Course List)

What is a firms intrinsic value? Its current stock price? Is the stocks true long-run value more closely relate...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)