Water Drops, Inc purchased equipment for $200,000
The company recorded total depreciation of $140,000. On January 1, 2017, the company exchanges the equipment for new equipment, paying $150,000 cash. The fair market value of the new equipment is $250,000. Prepare the journal entry to record this transaction. Assume the exchange has commercial substance.
What will be an ideal response
Equipment (new) 250,000
Accumulated Depreciation—Equipment 140,000
Gain on Disposal 40,000
Equipment (old) 200,000
Cash 150,000 .Calculation of gain or loss on exchange:
Market value of assets received $250,000
Less:
Book value of asset exchanged $60,000
Cash paid 150,000 (210,000 )
Gain or (Loss) $40,000
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