Question

Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

Answer 1

Answer and Explanation:

The journal entry is given below:

Equipment/Computer $3,300    

Accumulated depreciation-Truck $18,000    

      To Truck $20,000  

      To Gain on disposal of truck  $800  

     To  Cash $500

(Being the exchange is recorded)

Here the equipment and accumulated depreciation is debited as it increased the asset and credited the truck, cash and gain as it decreased the assets and increased the revenue