Stellar Corporation traded a used truck (cost $21,200, accumulated depreciation

Question

Stellar Corporation traded a used truck (cost $21,200, accumulated depreciation $19,080) for a small computer with a fair value of $3,498. Stellar also paid $530 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.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Stellar Corporation

Journal

Working note

Cost price of truck = $21,200

Accumulated depreciation =$19,080

Book value of truck = 21,200 - 19,080

= $2,120

Cost price of computer = $3,498

Less: Cash paid = $530

Less: book value of truck given = 2,120

Hence, gain on exchange of truck = $848

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Account titles Debit Credit Computer 3,498 Truck 2,120 Cash 530 Income statement 848 (Truck having book value of $2,120 was exchanged for computer of $3,498 by giving cash $530)

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