Question

A truck costs $ 104 000 when new and has accumulated depreciation of $ 95 000....

A truck costs $ 104 000 when new and has accumulated depreciation of $ 95 000. Suppose Jake Towing exchanges the truck for a new truck. The new truck has a market value of $ 57 000?, and Jake pays cash of $ 42 comma 000. Assume the exchange has commercial substance. What is the result of this? exchange?

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Answer #1
Old truck
Purchase price 104,000.00
Accumulated Depreciation -95,000.00
Book Value 9,000.00

Since the exchnage has a commercial substance, the exchanged asset will be recorded at its fair value.

Gain on exchange = FV of asset received - book vakue of asset given - cash payment = 57000-9000-42000 = 6000

The following journal entry will be recorded in the books of the buyer of new truck:

New Truck 57,000.00
Accumulated Depreciation 95,000.00
    Old Truck 104,000.00
    Cash 42,000.00
    Gain on exchange 6,000.00

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