Ask Question
28 September, 09:16

Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. Navajo also paid $500 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.)

+1
Answers (1)
  1. 28 September, 10:57
    0
    Dr Computer $3,300

    Dr Accumulated depreciation-Truck $18,000

    Cr Truck - Fixed Asset $20,000

    Cr Gain on disposal of truck (Balancing Figure) $800

    Cr Cash Account $500

    Explanation:

    The disposal of a Fixed asset is a three step procedure and is given as under:

    Remove the Accumulated depreciation and the cost of the fixed asset Record the receipt of the consideration at Fair Value Record the payment or receipt of the cash

    Always remember that the balancing figure will go to Profit and loss statement.

    Step1: Remove the Accumulated depreciation and the cost of the fixed asset

    The asset value and the accumulated depreciation would be removed from the books of accounts and the balance figure would be transfered to profit and loss account.

    Dr Accumulated Depreciation $18,000

    Dr Profit & Loss Account $2,000

    Cr Truck - Fixed Asset $20,000

    Step2: Record the receipt of the consideration at Fair Value

    Dr Computer - Fixed Asset $3,300

    Cr Profit and Loss Account $3,300

    Step3: Record the payment or receipt of the cash

    The receipt of the payment will treated as:

    Dr Profit and loss Account $500

    Cr Cash Account $500

    The aggregate Effect if I summarizee would be:

    Dr Computer $3,300

    Dr Accumulated depreciation-Truck $18,000

    Cr Truck - Fixed Asset $20,000

    Cr Gain on disposal of truck (Balancing Figure) $800

    Cr Cash Account $500
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers