Problem 33-11

Yellow Company acquired a delivery truck, making payment of $2,680,000, the payment being analyzed as follows:

Price of truck 2,500,000

Charge of extra equipment 50,000

Value added tax 300,000

Insurance for one year 120,000

Motor vehicle registration 10,000

Total 2,980,000

Less: trade in value allowed on

old truck 300,000

Cash paid 2,680,000

The old truck cost $1,500,000 and has a carrying amount of $200,000, and fair value of $50,000. The value added tax is refundable or recoverable.

Required:

Prepare journal entry to record the exchange transaction.