On October 1, Bentley Delivery Services acquired a new truck with a list price (

Question

On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $162,000. Bentley Delivery received a trade-in allowance (fair market value) of $22,100 on an old truck of similar type and paid cash of $139,900. The following information about the old truck is obtained from the account in the equipment ledger: cost, $96,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $64,000; annual depreciation, $16,000 Assume the exchange has commercial substance a. Journalize the entry to record the current depreciation of the old truck to the date of trade-in. Depreciation Expense-Trucks ? Incorrect Accumulated Depreciation-Trucks Feedback Check My Work Remember that the amount given for the depreciation on the fixed asset is the annual amount. b. Journalize the entry to record the transaction on July 1. If an amount box does not require an entry, leave it blank.

Explanation / Answer

SOLUTION

S.No. Account titles and Explanation Debit ($) Credit ($) 1. Depreciation Expense 12,000   Accumulated Depreciation ($16,000*9/12) 12,000 (To record the current depreciation of the old truck) 2. New Truck 162,000 Accumulated Depreciation, Old Truck ($64,000+$12,000) 76,000 Gain on sale of truck 2,100 Old truck 96,000 Cash 139,900 (To record the exchange transaction)

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