On July 1, 2016, Alpha Company exchanged an old computer (Equipment) with a hist

Question

On July 1, 2016, Alpha Company exchanged an old computer (Equipment) with a historical cost of $1,500 that had accumulated depreciation of $800 after all June adjusting entries had been processed. The exchange was for a new computer having a fair value of $900. The transaction has commercial substance. Using this information, how much should be recorded on July 1 for the following accounts:

Accumulated Depreciation, Equipment

Gain or (Loss) on Sale (Enter any loss amount with $ sign inside of brackets)

Equipment - New

Explanation / Answer

Gain on exchange:

Entry:

Fair value of computer 900 Less: Book value Cost 1500 Accummulated depreciation -800 Net book value 700 -700 Gain 200

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