Question

Marigold Corporation traded a used truck (cost $21,600, accumulated depreciation $19,440 ) for a small computer with a fair value of $3,564. Marigold also paid $540 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automaticqlly indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit entries before credit entries.)

Answer 1

The journal entry to record the exchange is as follows: Debit the small computer for its fair value, debit the accumulated depreciation on the truck, debit the loss on disposal of the truck, and credit the cost of the truck.

Step-by-step explanation:

The journal entry to record the exchange of the used truck for the small computer would be as follows:

1. Debit: Small Computer (Fair Value) - $3,564
2. Debit: Accumulated Depreciation - $19,440
3. Debit: Loss on Disposal of Truck - $540
4. Credit: Truck (Cost) - $21,600

This journal entry accounts for the fair value of the small computer, the accumulated depreciation on the truck, the loss on disposal of the truck, and removes the truck from the books with its cost.