Question 17 Your answer is partially correct. Try again. Marin Company purchased

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Question 17 Your answer is partially correct. Try again. Marin Company purchased a heavy-duty truck on July 1, 2014, for $29,280. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $7,080. The company uses the straight-line method. It was traded on August 1, 2018, for a simlar truck costing $41,595; $16,415 was allowed as trade-in value (also fair value) on the old truck and $25,180 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? (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Trucks (new) 41595 Accumulated Depreciation 2220 Loss on Disposal of Trucks 2220 Cash 25180 Trucks (old) 29280

Explanation / Answer

SOLUTION

Question 17

Journal entry-

*Accumulated Depreciation = ($29,280 - $7,080) * 49 months/120 months = $9,065

** Loss on Disposal of Trucks-

Book Value = $29,280 - $9,065 = $20,215

Loss = Book value - Trade-in

= $20,215 - $16,415 = $3,800

S.No. Account titles and Explanation Debit ($) Credit ($) 1. Trucks (new) 41,595 Accumulated Depreciation* 9,065 Loss on Disposal of Trucks ** 3,800   Trucks (old) 29,280   Cash 25,180

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