Question

Entries for Trade of Fixed Asset

On July 1, Twin Pines Co., a water distiller, acquired new bottling equipment with a list price (fair market value) of $551,000. Twin Pines received a trade-in allowance (fair market value) of $109,500 on the old equipment of a similar type and paid cash of $441,500. The following information about the old equipment is obtained from the account in the equipment ledger: cost, $364,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $237,600; annual depreciation, $21,600. Assuming that the exchange has commercial substance.

a. Journalize the entry to record the current depreciation of the old equipment to the date of trade-in.

	Depreciation Expense-Equipment
	Accumulated Depreciation-Equipment

b. Journalize the entry to record the exchange transaction on July 1. If an amount box does not require an entry, leave it blank.

	Accumulated Depreciation-Equipment
	Equipment
	Loss on Exchange of Equipment
	Equipment
	Cash

( I am not sure about entry name)

Answer 1

a)

General Journal	Debit	Credit
Depreciation expense - Equipment ($21,600 ×6/12)	$10,800
Accumulated depreciation - Equipment		$10,800
(To record current depreciation of old equipment)

b)

General Journal	Debit	Credit
Accumulated depreciation - Equipment ($237,600 + $10,800)	$248,400
Equipment	$551,000
Loss on exchange of Equipment ($364,000 - $248,400 - $109,500)	$6,100
Equipment		$364,000
Cash		$441,500
(To record exchange transactions)