On July 1, 2016, Alpha Company exchanged an old computer (Equipment) with a hist
ID: 2581666 • Letter: O
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
Equipment = Cost
Carrying value of the asset = Cost - Accumulated depreciation
= 1,500 - 800 = 700
Gain on sale = Fair value - Carrying value
= 900 - 700 = 200
Equipment - New = Fair value
Accumulated depreciation 800 Equipment 1,500 Gain on sale 200 Equipment - New 900Related Questions
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