Equipment costing $118,000 has accumulated depreciation of $94,000. The equipment is a trade-in for new equipment costing $196,000. If the trade-in value received for the old equipment is $28,000, the journal entry to record this transaction is to:
A) debit Equipment (New) for $196,000, and credit Cash for $196,000.
B) debit Equipment (New) for $196,000, debit Accumulated Depreciation – Equipment for $94,000, credit Equipment (Old) for $118,000 and credit Cash for $172,000.
C) debit Equipment (New) for $196,000, debit Accumulated Depreciation – Equipment for $94,000, debit Loss on Exchange of Assets for $24,000, credit Equipment (Old) for $118,000, credit Cash for $196,000.
D) debit Equipment (New) for $196,000, debit Accumulated Depreciation – Equipment for $94,000, credit Gain on Exchange of Assets for $4,000, credit Equipment (Old) for $118,000 and credit Cash for $168,000.
D) debit Equipment (New) for $196,000, debit Accumulated Depreciation – Equipment for $94,000, credit Gain on Exchange of Assets for $4,000, credit Equipment (Old) for $118,000 and credit Cash for $168,000.
Explanation: subtract trade in value from cost for Cash credit amount; subtract credits from debits for gain amount. Ex: $196,000- $28,000 = $168,000 cash; $94,000 (acc. Depreciation) + $196,000 (new equipment) - $168,000 (cash) - $118,000 (equipment old) = $4,000 (gain).
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