Question

Pronghorn Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,498. Pronghorn also paid $530 in the transaction. Prepare the journal entry to record the exchange, assuming the exchange lacks commercial substance.

Answer 1

Answer:

Truck:

Cost = $20,000

Accumulated depreciation = $18,000

Small computer worth = $3,498

Paid in transaction = $530

The Journal entry is as follows:

Equipment/Computer A/c                       Dr. $3,498

Accumulated depreciation-Truck  A/c   Dr. $18,000

To Truck                                                                        $20,000

To Gain on disposal of truck                                        $968                                        

To cash                                                                          $530

(To record the exchange)