Question

During the current year, Blossom Construction trades an old crane that has a book value of $122,400 (original cost $190,400 less accumulated depreciation $68,000) for a new crane from Blue Manufacturing Co.

Answer 1

Answer:

The journal entry would be

       New Equipment (crane)                           $ 122,400 Dr

        Depreciation Expense (old crane)         $ 68,000 Dr

         Old Equipment                                                       $ 190,400 Cr

As the price of the new equipment is not given the profit or loss cannot be estimated. the whole amount less depreciation is transferred to new equipment account.  if depreciation is treated separately and not set off against the equipment the entry would be under the accrual basis of accounting

          New Equipment (crane)                           $ 122,400 Dr

        Depreciation Expense (old crane)         $ 68,000 Dr

         Old Equipment                                                       $ 122,400 Cr

           Accumulated Depreciation                                   $ 68,000 Cr