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25 May, 17:13

Flint Corporation traded a used truck (cost $26,000, accumulated depreciation $23,400) for a small computer with a fair value of $4,290. Flint also paid $650 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

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  1. 25 May, 18:36
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    The journal entry to record the exchange:

    Debit Accumulated depreciation $23,400

    Debit Computer $4,290

    Credit Cash $650

    Credit Truck $26,000

    Credit Gain on exchange asset $1,040

    Explanation:

    Book value of the truck = $26,000 - $23,400 = $2,600

    Flint Corporation paid $650 in the transaction

    Book value of the truck + Amount of Cash Flint paid = $2,600 + $650 = $3,250 < fair value of the computer

    The company will record gain on exchange by the entry

    Debit Accumulated depreciation $23,400

    Debit Computer $4,290

    Credit Cash $650

    Credit Truck $26,000

    Credit Gain on exchange asset $1,040
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