Slaton Corporation traded a used truck for a new truck. The used truck cost $53,

Question

Slaton Corporation traded a used truck for a new truck. The used truck cost $53,440 and has accumulated depreciation of $45,424. The new truck is worth $93,520. Slaton also made a cash payment of $88,176.

Prepare Slaton’s entry to record the exchange. (The exchange has commercial substance.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

    Cash    Loss on Disposal of Trucks    Accumulated Depreciation?Trucks    Trucks (new)    Trucks (used)    

    Accumulated Depreciation?Trucks    Loss on Disposal of Trucks    Trucks (new)    Trucks (used)    Cash    

    Trucks (used)    Cash    Loss on Disposal of Trucks    Trucks (new)    Accumulated Depreciation?Trucks    

    Trucks (new)    Loss on Disposal of Trucks    Trucks (used)    Cash    Accumulated Depreciation?Trucks    

    Cash    Trucks (new)    Accumulated Depreciation?Trucks    Loss on Disposal of Trucks    Trucks (used)    

Explanation / Answer

Answer:

Used truck historical cost = 53440

Accumulated depreciation = 45424

Net book value = 53440 - 45424 = 8016

New truck cost = 93520

Cash given = 88176

Implied sale value of old truck = 93520 - 88176 = 5344, which is less than net book value. Therefore, there is a loss on sale of old truck.

Loss on sale of old truck = 8016 - 5344 = 2672

Journal entry:

New truck Dr. 93520

Loss on sale of old truck Dr. 2672

Accumulated depreciation Dr. 45424

To cash......................................................88176

To truck (used)..........................................53440

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