Question

Splish Corporation traded a used truck (cost $20,800, accumulated depreciation $18,720) for a small computer with a fair value of $3,432. Splish also paid $520 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

Answer 1

Step-by-step explanation:

The journal entry is shown below:

Computer A/c Dr $3,432

Accumulated depreciation - Truck A/c Dr $18,720

To Truck A/c $20,800

To Gain on disposal of truck $832

To Cash A/c $520

(Being the exchange is recorded)

The computation of the gain on disposal of truck is shown below:

= Fair value of Computer + accumulated depreciation - purchase value of truck - cash paid

= $3,432 + $18,720 - $20,800 - $520

= $832