Brief Exercise 10-9 Stellar Corporation traded a used truck (cost $20,000\' accu

Question

Brief Exercise 10-9 Stellar Corporation traded a used truck (cost $20,000' accumulated depreciation s 18,000) for a small computer worth s3,828. Stellar also paid s 580 the transaction. Prepare the journal entry to record the exchange, assuming the exchange lacks 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 for the amounts.) Account Titles and Explanation Debit Credit

Explanation / Answer

Answer:

Description

Debit$

Credit$

Computer equipment

2580

Accumulated Depreciation

18000

To truck

20,000

To Cash

580

Working notes for the answer:

Calculation of the gain or loss

Cost

20,000

Less: accumulated depreciation

18000

Book value

2000

Fair Value
(3828+580)

3828

Gain on Purchase

1828

Cash was Given - Defer ALL Gain

FV of New Equipment

$4408

Gain on Exchange

($1828)

Cost Basis of New Equipment

$2580

           

Description

Debit$

Credit$

Computer equipment

2580

Accumulated Depreciation

18000

To truck

20,000

To Cash

580

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