Question
Gilly Construction trades in an old tractor for a new tractor, receiving a $26,000 trade-in allowance and paying the remaining $78,000 in cash. The old
Gilly Construction trades in an old tractor for a new tractor, receiving a $26,000 trade-in allowance and paying the remaining $78,000 in cash. The old tractor had cost $67,000, and straight-line accumulated depreciation of $36,250 had been recorded to date under the assumption that it would last eight years and have a $9,000 salvage value. Answer the following questions assuming the exchange has commercial substance. |
1. | What is the book value of the old tractor at the time of exchange? |
2. | What is the loss on this asset exchange? |
3. | What amount should be recorded (debited) in the asset account for the new tractor? |
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