Brief Exercise 10-10 Vaughn Company traded a used welding machine (cost $9,720,

Question

Brief Exercise 10-10

Vaughn Company traded a used welding machine (cost $9,720, accumulated depreciation $3,240) for office equipment with an estimated fair value of $5,400. Vaughn also paid $3,240 cash in the transaction.

Prepare the journal entry to record the exchange. (The exchange has 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 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Explanation:- Being exchange of used welding machine with an estimated fair value of $5400, Accumulated Depreciation of $3240. The loss on Disposal of an asset is $4320 ($9720 - $5400) which needs to be debited. The cost of the welding machine is $9720 and the amount of cash being paid is $3240.

Account Titles and Explanation Debit ($) Credit ($) Office Equipment 5400 Accumulated Depreciation 3240 Loss on Disposal 4320 Welding Machine 9720 Cash 3240

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