80.2K

Verified Solution

Link Copied!

Ine transactions IIstea Delow occurrea at Jarrea Lompany aur$$ng $\frac{\frac{?}{{?}_U}}{x}$I :

DATE TRANSACTIONS

Mar. $25$ Exchanged a printer $($Office Equipment$)$ that had an original cost of $$6,140$ when purchased on January $4$ th$,$ two years ago. The useful life of the old asset was originally estimated at five years and the salvage value at $$240.$ The new printer had a price and market value of $$10,240.$ Jarred Co$.$ exchanged the old machine and paid $$5,120$ cash. The new printer is estimated to have a useful life of five years and a salvage value of $$640.$

July $19$ Exchanged a truck $($Vehicles$)$ for a new one that had a sales price, and fair value, of $$43,600.$ Received a trade$-$in allowance of $$10,900$ on the old truck and paid cash of $$32,700.$ The old truck had been purchased for $$35,720$ on May $27$ th$,$ three years earlier. The life of the old truck$-$was originally estimated at four years and the salvage value at $$6,200.$ The life of the new truck is estimated to be five years and it is estimated to have a salvage value of $$9,200.$

Aug. $18$ Sold a truck that was purchased on January $5$th$,$ two years ago, for an original purchase price of $$42,440.$ It had an estimated life of four years and an estimated salvage value of $$7,400.$ Sales price is as indicated in Instructions, below.

Required:

Note: In following these instructions, assume that straight$-$line depreciation is used and that depreciation was last recorded on December $31,20$X$0.($Note: The presentation in the text related to the exchanges of assets has been superseded by FAS $153.$ Under FAS $153,$ gains and losses on the exchange of assets that have commercial substance are recognized in full.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.$)$

Prepare the journal entries to record the two exchange transactions.

Record the journal entries for the truck sold on August $18,20$X$1.$

a$.$ The sales price was $$20,500.$

b$.$ The sales price was $$16,400.$

Analyze:

What was the book value of the truck sold on August $18?$

Answer & Explanation Solved by verified expert

See Answer