Gilly Construction trades in an old tractor for a new tractor, receiving a $26,0
ID: 2445384 • Letter: G
Question
Gilly Construction trades in an old tractor for a new tractor, receiving a $26,000 trade-in allowance and paying the remaining $78,000 in cash. The old tractor had cost $67,000, and straight-line accumulated depreciation of $36,250 had been recorded to date under the assumption that it would last eight years and have a $9,000 salvage value. Answer the following questions assuming the exchange has commercial substance.
What is the book value of the old tractor at the time of exchange?
What is the loss on this asset exchange?
What amount should be recorded (debited) in the asset account for the new tractor?
Gilly Construction trades in an old tractor for a new tractor, receiving a $26,000 trade-in allowance and paying the remaining $78,000 in cash. The old tractor had cost $67,000, and straight-line accumulated depreciation of $36,250 had been recorded to date under the assumption that it would last eight years and have a $9,000 salvage value. Answer the following questions assuming the exchange has commercial substance.
Explanation / Answer
book value of the old tractor at the time of exchange
Cost=67000
Life=8 Years
Salavage Value=9000
Depreciation Per Year=67000-9000/8
=7250
Book Value=67000-36250=30750
2) loss on this asset exchange
=30750-26000
=4750
3) amount should be recorded (debited) in the asset account for the new tractor
Trade Allowance+Cash Paid=26000+78000
=104000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.