Question

Qs 9-16 Exchanging PPE LO6 Dean Carpet Stores owned an automobile with a $15,000 cost that had $13,500 accumulated, as of December 31, 2017. Its fair value on this date was $3,000. On the same dau, De Dean excha to pay an additional $2,750 eprec anged cash. auto for a computer with a fair value of $5,800. Dean was required pare th e entry to record this transaction for Dean.

please full calculation and explanation

Answer 1

Journal entry to record the exchange :

Accumulated depr 13500

Computer. 5800

Automobile. 15000

Cash. 2750

Gain on exchange 1,550

(To remove all accounts related to the automobile and

to setup the new computer at its fair value, and record the

balancing gain)

Explanation :

The above entry has a credit to Cash reflecting the additional consideration. The gain of $1550(5800-4250) is the balancing amount, and reflects that $4,250 of consideration (cash ($2750) and automobile ($15000 – $13500 = $1500)) was swapped for a computer worth $5800.

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