Ex. 10-1 Nonmonetary exchange. upment that cost $80,000 and has accumulated depr

Question

Ex. 10-1 Nonmonetary exchange. upment that cost $80,000 and has accumulated depreciation of $63,000 is exchanged for similar equipment with a fair value of $35,000 and $15,000 cash is received. The exchange lacke Instructions (a) Show the calculation of the gain to be recognized from the exchange. d commercial substance. ) Prepare the entry for the exchange. Show a check of the amount recorded for the new equipment. Solution 10-1 Gain Gain Recognized (b) GENERAL JOURNAL Debit Credit Ref Account Name Date Present calculation of the amount recorded for the new equipment

Explanation / Answer

(a) Book value of asset = $80000 - $63000 = $17000

Value of new asset = $35000

Cash paid = $15000

Gain on exchange = Value oc new asset - Cash paid - book value of old asset

= $35000 - $15000 - $17000

= $3000

(b) The journal entry would be:

New Equipment Dr $35000

To Cash $15000

To Old equipment $17000

To gain on exchange $3000

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