Question
Chip Company owns one delivery truck, which it purchased on October 1, 2015, at a cost of $76,800. The estimated life of the truck at
Chip Company owns one delivery truck, which it purchased on October 1, 2015, at a cost of $76,800. The estimated life of the truck at that time was four years. On June 30, 2018, the close of the fiscal year, the accumulated depreciation account had a balance of $52,800. On July 1, 2018, the company traded this vehicle for a new one having a cash price of $85,200. Cash of $67,200 was also exchanged for the new truck. The old truck had a fair market value of $18,000. Future cash flows were expected to be significantly different. The journal entry to record the trade-in is:
A)
Delivery Truck (new) | 67,200 | |
Accumulated Depreciation | 52,800 | |
Loss on Disposal of Fixed Assets | 24,000 | |
Delivery Truck (old) | 76,800 | |
Cash | 67,200 |
B)
Delivery Truck (new) | 91,200 | |
Accumulated Depreciation | 52,800 | |
Delivery Truck (old) | 76,800 | |
Cash | 67,200 |
C)
Delivery Truck (new) | 85,200 | |
Accumulated Depreciation | 52,800 | |
Loss on Disposal of Fixed Assets | 6,000 | |
Delivery Truck (old) | 76,800 | |
Cash | 67,200 |
D)
Delivery Truck (new) | 96,000 | |
Accumulated Depreciation | 48,000 | |
Delivery Truck (old) | 76,800 | |
Cash | 67,200 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started