Question

Chip Company owns one delivery truck, which it purchased on October 1, 2015, at a cost of $76,800. The estimated life of the truck at that time was four years. On June 30, 2018, the close of the fiscal year, the accumulated depreciation account had a balance of $52,800. On July 1, 2018, the company traded this vehicle for a new one having a cash price of $85,200. Cash of $67,200 was also exchanged for the new truck. The old truck had a fair market value of $18,000. Future cash flows were expected to be significantly different. The journal entry to record the trade-in is:

A)

Delivery Truck (new)	67,200
Accumulated Depreciation	52,800
Loss on Disposal of Fixed Assets	24,000
Delivery Truck (old)		76,800
Cash		67,200

B)

Delivery Truck (new)	91,200
Accumulated Depreciation	52,800
Delivery Truck (old)		76,800
Cash		67,200

C)

Delivery Truck (new)	85,200
Accumulated Depreciation	52,800
Loss on Disposal of Fixed Assets	6,000
Delivery Truck (old)		76,800
Cash		67,200

D)

Delivery Truck (new)	96,000
Accumulated Depreciation	48,000
Delivery Truck (old)		76,800
Cash		67,200

Answer 1

Correct option is: C)
Accounts	Debit	Credit
Delivery Truck (new)	$                                  85,200
Accumulated Depreciation	$                                  52,800
Loss on sale of Fixed assets	$                                     6,000
Delivery Truck (old)		$     76,800
Cash		$     67,200