1. On January 5, 2015, Mountain View Company purchased construction equipment for $702,700, with a useful life of six years and estimated salvage value of $94,000. The company uses the straight-line method of depreciation. On July 3, 2019, this equipment was traded for new similar construction equipment that has a value of $800,000. The company paid $588,000 cash and was given a trade-in allowance of $212,000 for the old equipment.

2. Assume the same facts as stated above, except that Mountain View paid cash of $521,650 on the trade-in and was given an allowance of $278,350 for the old equipment.

(Note: The presentation in the text related to the exchanges of assets has been superseded by FAS 153. Under FAS 153, gains and losses on the exchange of assets that have commercial substance are recognized in full. The deferral of gains (by reducing the basis in the new asset) only pertains to assets that lack commercial substance.)

1&2. Prepare the general journal entry needed on July 3, 2019, to record the trade-in. (Assume that the entry to bring depreciation up to date has been made.)

All information is provided above.

Journal entry worksheet Record the exchange assuming that the company paid $588,000 cash and was given a trade-in allowance of $212,000 for the old equipment. Note: Enter debits before credits. General Journal Debit Credit Date July 03, 2019 Journal entry worksheet