January 2 ,2014, traded in office equipment for new equipment that is similar. T

Question

January 2 ,2014, traded in office equipment for new equipment that is similar. The list price of the new office equipment is $15,000. Paid $9,000 cash and received a trade-in allowance of $6,000 for the old equpiment. The old equipment had been purchased on January 3, 2010, for $12,000. The old equipment has an estimated useful life og 5 years and a salvage value of $2,000. Depreciation on the old equipment was last recorded on December 31,2013.

Prepare Journal entry for Financial Accounting Rules

Repare Journal entry for the Income Tax method.

Explanation / Answer

Income tax method

Income tax method

Office equipment (New) 13000 Accumulated depreciation - office equipment (old) 8000 Office equipment (old) 12000 Cash 9000 Warehouse equipment (new) 15000 - Accumulated depreciation - warehouse equipment (old) 8000 - Gain on sale of equipment 2000 Warehouse equipment (old) 12000 Cash 9000

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