Question

Sheridan Corporation traded a used truck (cost $27,600, accumulated depreciation $24,840) for a small computer with a fair value of $4,554. Sheridan also paid $690 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

1  

Cr Truck equipment_______________27600

Db Accumulate depreciation__24840  

Db Computer______________4554  

Cr Cash__________________________690

Db Loss on Fixed asset sale___1104  

Explanation:

When there is commercial substance (which is when there is a change in cash flow resulting from the transaction), the parties should recognize a gain or loss on the exchange. If there is no commercial substance, record the acquired asset at the book value of the asset given up in the exchange