Question

Bonita Corporation traded a used truck (cost $23,600, accumulated depreciation $21,240 ) for a small computer with a fair value of $3,894. Bonita also paid $590 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically 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 of the used truck for the small computer would be: Debit Small Computer $3,894, Debit Accumulated Depreciation $21,240, Debit Loss on Exchange $350, Credit Used Truck $23,600, Credit Cash $590.

Step-by-step explanation:

To record the exchange of the used truck for the small computer, the journal entry would be:

Debit Small Computer $3,894

Debit Accumulated Depreciation $21,240

Debit Loss on Exchange $350

Credit Used Truck $23,600

Credit Cash $590

The Small Computer is debited for its fair value of $3,894, the Accumulated Depreciation account is debited for its remaining balance of $21,240, and the Loss on Exchange account is debited for the difference between the fair value and the net book value of the truck, which is $350. The Used Truck account is credited for its cost of $23,600, and the Cash account is credited for the amount paid in the transaction, which is $590.