On January 2, 2015, Mullins Company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated residual value of $3,000. Straight-line depreciation was used.

On September 1, 2019, the truck and $40,000 cash were exchanged for a new delivery truck that had a fair value of $70,000.

Assuming the transactions have commercial substance, circle the answer that is correct when recording the journal entry of the above asset exchange transaction.

Sept 1	New Delivery Truck
	Accumulated Depreciation, Old Truck
	Gain (Loss) on exchange
	Old Delivery Truck
	Cash

Question 5 options:

	The accumulated depreciation for the old truck would be debited by $28,000 and there would be a loss on exchange of $13,000.
	The accumulated depreciation for the old truck would be debited by $28,000 and the gain on exchange would be credited by $13,000.
	The new delivery truck would be debited by $70,000 and the accumulated depreciation, old truck would be debited by $20,000.
	The new delivery truck would be debited by $70,000 and there would be no gain or loss.