1. Bridgeport Company purchased a heavy-duty truck on July 1, 2014, for $28,920.

Question

1. Bridgeport Company purchased a heavy-duty truck on July 1, 2014, for $28,920. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $5,640. The company uses the straight-line method. It was traded on August 1, 2018, for a similar truck costing $45,314; $15,724 was allowed as trade-in value (also fair value) on the old truck and $29,590 was paid in cash. A comparison of expected cash flows for the trucks indicates the exchange lacks commercial substance. What is the entry to record the trade-in?

Debit Credit
Truck New 45,314
Accumulated Depreciation (it is not 9,312)
Loss of disposal trucks (it is not 3,884)
Truck old 28,920
Cash 29,590

2. Concord Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,052,000 on March 1, $1,200,000 on June 1, and $3,003,300 on December 31.

Concord Company borrowed $1,034,800 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,316,100 note payable and an 11%, 4-year, $3,193,700 note payable. Compute avoidable interest for Concord Company. Use the weighted-average interest rate for interest capitalization purposes.

=

Avoidable interest

Explanation / Answer

1) Calculation of Loss :-

Journal Entry :-

Particulars Amount($) Depreciation Exp. ($28920-$5640)/10 2328 Accumulated Depreciation ($2328*4) 9312 Book Value ($28920-$9312) 19608 Less : Sale Value (15724) Loss 3884

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