Problem 33-11 Yellow Company acquired a delivery truck, making payment of $2,680
ID: 2608764 • Letter: P
Question
Problem 33-11Yellow Company acquired a delivery truck, making payment of $2,680,000, the payment being analyzed as follows:
Price of truck 2,500,000 Charge of extra equipment 50,000 Value added tax 300,000 Insurance for one year 120,000 Motor vehicle registration 10,000 ————— Total 2,980,000 Less: trade in value allowed on old truck 300,000 —————— Cash paid 2,680,000
The old truck cost $1,500,000 and has a carrying amount of $200,000, and fair value of $50,000. The value added tax is refundable or recoverable.
Required:
Prepare journal entry to record the exchange transaction. Problem 33-11
Yellow Company acquired a delivery truck, making payment of $2,680,000, the payment being analyzed as follows:
Price of truck 2,500,000 Charge of extra equipment 50,000 Value added tax 300,000 Insurance for one year 120,000 Motor vehicle registration 10,000 ————— Total 2,980,000 Less: trade in value allowed on old truck 300,000 —————— Cash paid 2,680,000
The old truck cost $1,500,000 and has a carrying amount of $200,000, and fair value of $50,000. The value added tax is refundable or recoverable.
Required:
Prepare journal entry to record the exchange transaction.
Yellow Company acquired a delivery truck, making payment of $2,680,000, the payment being analyzed as follows:
Price of truck 2,500,000 Charge of extra equipment 50,000 Value added tax 300,000 Insurance for one year 120,000 Motor vehicle registration 10,000 ————— Total 2,980,000 Less: trade in value allowed on old truck 300,000 —————— Cash paid 2,680,000
The old truck cost $1,500,000 and has a carrying amount of $200,000, and fair value of $50,000. The value added tax is refundable or recoverable.
Required:
Prepare journal entry to record the exchange transaction.
Explanation / Answer
Calculation of Gain or Loa
Calculation of gain or loss on old truck
Carrying value of truck
200,000
Less: Exchange value of truck
300,000
Gain on exchange
100,000
Value added tax refundable
300,000
Cash paid
2,680,000
Journal Entry
Debit
Credit
Truck value (Cost+ old truck value-VAT recoverable)
2,980,000
Gain on old truck
100,000
Cash
2,680,000
Old truck (Carrying value)
200,000
Calculation of gain or loss on old truck
Carrying value of truck
200,000
Less: Exchange value of truck
300,000
Gain on exchange
100,000
Value added tax refundable
300,000
Cash paid
2,680,000
Journal Entry
Debit
Credit
Truck value (Cost+ old truck value-VAT recoverable)
2,980,000
Gain on old truck
100,000
Cash
2,680,000
Old truck (Carrying value)
200,000
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