A truck was acquired for $100,000 and has accumulated depreciation of $70,000
The business exchanges the truck for a new one. The new truck has a market value of $120,000 and the business pays $100,000 cash. Assume the exchange has commercial substance. Prepare the journal entry to record this transaction.
What will be an ideal response
Truck (new) 120,000
Accumulated Depreciation—Truck 70,000
Loss on Disposal 10,000
Truck (old) 100,000
Cash 100,000 .Calculation of gain or loss on exchange:
Market value of assets received $120,000
Less:
Book value of asset exchanged $30,000
Cash paid 100,000 (130,000 )
Gain or (Loss) $(10,000 )
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