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Exercise 10-23 Exchanging assets P5 Gilly Construction trades in an old tractor for a new tractor, receiving a $29,000 trade-

1, 2 and 3 please

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Answer #1

1. Book value of the old tractor at the time of exchange = Cost - Accumulated Depreciation = $96,000 - $52,500 = $43,500

2. Loss on this asset exchange = Book value of the old tractor at the time of exchange - Trade-in allowance = $43,500 - $29,000 = $14,500 (loss)

3. Amount recorded (debited) in the asset account for the new tractor = Trade-in allowance + Remaining cash payment = $29,000+ $83,000 = $112,000

The entry of exchange of old tractor with new tractor will be:

New Tractor Dr 112,000

To Old Tractor 29,000

To Cash 83,000

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