Question

Ayayai Corporation traded a used truck (cost $20,800, accumulated depreciation $18,720) for a small computer with a fair value of $3,432. Ayayai also paid $520 in the transaction. Prepare the journal entry to record the exchange, assuming the exchange lacks 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:

See below.

Explanation:

Journal entries to record the transaction are as follows,

Debit Computer account with $3,432

Debit Accumulated depreciation account with $18,720

                                                 Credit Truck account with $20,800

                                                 Credit Cash Account with $520

                                                 Credit profit on sale of asset with $832

This the journal entry that balances the books by targeting appropriate accounts.

Note that accumulated depreciation account has a credit balance as it is an asset reducing account.

Hope that helps.