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gummiesweets
Mar 23, 2010, 05:48 PM
Corans delivery company and Enrights express delivery exchanged delivery trucks on Jan 1, 2008. Corans truck cost 22,000. It has accumulated depreciation of 15,000 and a fair market value of $4000. Enrights truck cost 10,000. It has accumulated depreciation of 8,000 and a fair market value of 4,000. The transaction has commercial substance.

A) Journalize the exchange for Corans Delivery company
B) Journalize the exchange for Enrights Express delivery

This was what I got for the problem
A)
Cost of Corans Truck... 22,000
Less: Accumulated Depreciation... 15,000
Book Value... 7,000 (22,000-15,000)
Fair market value of Corans truck... 4,000
Loss on Disposal... 3000 (7,000-4,000)

Fair market value of Corans truck... 4,000
Cash paid... 10,000
Cost of Enrights truck... 14,000(10,000+4,000)

Journal Entry:
Dr. Enrights truck 14,000
Dr. Accumulated Deprecation 15,000
Dr. Loss on Disposal 3,000
Cr. Corans truck 22,000
Cr. Cash 10,000

The problem I'm not sure is the cash paid part? I just used 10,000 from the amount of Enrights truck cost.

B)
Cost of Enrights truck... 10,000
Less: Accumulated Depreciation... 8,000
Book Value... 2,000 (10,000-8,000)
Fair market value of Enrights truck... 4,000
Gain on disposal... (4,000-2000)

Fair market value of Enrights truck... 4,000
Cash paid... 22,000
Cost of Corans Truck... 26,000 (4,000 + 22,000)

Journal Entry:
Dr. Corans truck... 26,000
Dr. Accumulated Depreciation... 8,000
Cr. Gain on Disposal... 2,000
Cr. Enrights truck... 10,000
Cr. Cash... 22,000

Also same thing, I don't know if cash paid part is right? I used 22,000 from the amount of Corans truck cost.

morgaine300
Mar 26, 2010, 08:23 PM
Where are you coming up with the 10,000 of cash? As far as I can tell, you're creating that out of thin air because there's no mention of it in the problem. You've got the right concept if you'll dump the cash part and re-calculate based on that being missing.