Question

Tamarisk Ltd. traded a used truck (cost $31,700, accumulated depreciation $28,530, fair value $2,320) for a new truck. Tamarisk did look up the value of its used truck and determined its fair value at the date of the trade is $2,320. The list price of the new truck is $38,080 and the trade-in allowance given on the trade was $5,490.

If Tamarisk paid $32,590, what should be the amount used as the cost of the new truck?

The cost of the new truck

$

Prepare Tamarisk’s entry to record the exchange. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Solution:

Cost of new truck = Amount paid + Fair value of used truck = $32,590 + $2,320 = $34,910

Journal Entries - Tamarisk Ltd
Event	Particulars	Debit	Credit
1	Truck (new) Dr	$34,910.00
	Accumulated depreciation - Truck Dr	$28,530.00
	Loss on sales of truck Dr	$850.00
	To Cash		$32,590.00
	To Truck (Old)		$31,700.00
	(To record exchange of trucks)