Sanderson & benit construction inc. purchased equipment with a cost of $40,000 a

Question

Sanderson & benit construction inc. purchased equipment with a cost of $40,000 and a salvage value of $5,000 with a life of 5 years. The equipment is now fully depreciated. If the old equpment is exchanged for new equipment at a cash price of $42,000 with an appraised value of $45,000, the entry for this exchange would debit the new equipment for : ( no trade in allowance)
A) $45,000 with a debit to loss on exchange for $2000

B) $50,000 with ni debit to loss on exchange

C) $47,000 with no debit to loss on exchange

D) $45,000 with a debit to gain on exchange for $3,000

Explanation / Answer

A) $45000 with a debit to loss on exchange for $2000

Journal entry would be :

Particulars Debit Credit New Equipment A/C 45000 Loss on exchange of equipment 2000 Cash A/C 42000 Old Equipment A/C 5000

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